QTIP trust

Qualified Terminable Interest Property Trust

A trust into which the trustor deposits funds and other assets to provide for a surviving spouse while also maintaining control of what happens to those assets after the surviving spouse dies. In a Q-TIP, the trustor names his/her surviving spouse as beneficiary and provides that income and/or principal from the trust shall pass to that spouse upon the trustor's death. However, when the surviving spouse also dies, what remains in the trust is distributed to heirs as if it had been a part of the trustor's estate. A Q-TIP is a common trust when a person has children from a previous marriage; that Q-TIP provides for the surviving spouse but later is transferred to children from one's first marriage to ensure that the estate takes care of them as well.

QTIP trust

A marital-deduction trust in which the surviving spouse receives income from the trust's assets for life but the trust's principal is left to someone else, usually children. A QTIP trust controls the eventual beneficiaries while at the same time taking advantage of the marital deduction and providing an income for the surviving spouse.
Should my spouse and I consider setting up a QTIP trust? Why?

A QTIP trust is a marital deduction trust that limits the surviving spouse's access to and control of the trust property. QTIP, or Qualified Terminable Interest Property, is property "qualified" by your executor to take advantage of the federal and state estate tax marital deduction(s).

A QTIP trust may be appropriate if you or your spouse has serious concerns about the following:

  1. A surviving spouse remarrying and then benefiting the new spouse.
  2. A surviving spouse benefiting someone other than your children.
  3. A surviving spouse's creditors attaching the trust property.
  4. A surviving spouse who is unsophisticated or vulnerable.
A QTIP trust addresses these concerns, but the "cost" for such control is that the trust requires the services of a professional or highly sophisticated executor who will make the QTIP election on time and in consideration of all the tax and estate planning circumstances existing at the time of the death. A mistake or missed deadline could cost the estate thousands of dollars and lose the marital deduction for the estate.

Gloria Cole, Attorney, private practice, Weston, MA
References in periodicals archive ?
In estates in which an estate tax return will be filed, the PR should consider filing an extension for the time to file the return if assets are passing into a QTIP trust.
The assets in her estate, including the assets in the QTIP trust, will receive a basis equal to their value at the date of her death (helpful if there has been appreciation in the value of the property between the two deaths).
The designation of the QTIP trust as a beneficiary did not trigger the acceleration of tax on the IRD when the plan passed to the trust.
5 million by the lime Daisy passes away, and the properly was owned by Daisy or by a QTIP trust for Daisy.
202) If a QTIP trust is employed, the trust will also be cognizable under the gross estate provisions via elective provisions.
Almost routinely, advisors encourage the use of a QTIP Trust as the preferred technique for blended families with higher net worth.
A QTIP trust allows the surviving spouse to receive income from the trust's assets for life but the principal goes to someone else, usually the children.
255) The unlimited marital deduction clause in a QTIP trust must provide all income (except stub income) to the spouse, at least annually, and disallow any other permissible beneficiary during the spouse's lifetime.
With a QTIP trust, you can set aside assets that earn income for your surviving spouse for the rest of his or her life.
It describes the two types of marital deductions that provide the needed flexibility, the Clayton contingent QTIP trust and the marital deducation disclaimer trust.
In order to determine how to best use a QTIP trust with an IRA, it is imperative that one first understand the IRA distribution rules.