nondeductible terminable interest rule
- A principle in estate tax law specifying that the value of a property interest, which a surviving spouse inherits, may not be eligible for the marital deduction. This happens if it transfers from the surviving spouse to another individual for an amount that is deemed inadequate, upon the occurrence of a certain condition, such as the lapse of a specified period
- In accordance with the nondeductible terminable interest rule, the inherited property that was passed down to a new individual didn't qualify for the marital deduction due to insufficient payment.
- The estate tax was affected due to the implementation of the nondeductible terminable interest rule, as the property interest shifted hands without adequate compensation.
- The nondeductible terminable interest rule came into play when the estate was passed to the surviving spouse and later, insufficiently compensated to another party.