Qualified Terminable Interest Property Trust

(redirected from QTIP Trusts)

Qualified Terminable Interest Property Trust (Q-TIP)

A trust that allows a surviving spouse to receive income generated from the trust, while the actual distribution of the trust's assets is made to other beneficiaries such as the grantor's children.

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.
References in periodicals archive ?
In the case of general power of appointment and QTIP trusts, the integrity of the marital deduction is further enforced by the requirement that no one other than the surviving spouse can be a current beneficiary of the trust.
Like credit shelter or disclaimer trusts, QTIP trusts can create tension, because the interests of multiple beneficiaries must be considered.
Surviving spouses who do not need the income interest generated by QTIP trusts may want to give away the income interest during life to take advantage of the tax-exclusive nature of the gift tax (as opposed to the tax-inclusive nature of the estate tax).
Some examples of exceptions to these general requirements to qualify for the unlimited marital deduction include marital deduction and QTIP trusts, as well as, transfers to non US citizen spouses.
QTIP trusts are a staple of estate planning form books, and qualifying drafting language is readily available.
QTIP trusts are a popular estate-planning tool for married couples with potentially taxable estates.
Rubin, "Tax Results of Settling Trust Litigation Involving QTIP Trusts," (31) discusses such tax consequences in detail.
The proposed changes will affect any trust that relies on income to determine amounts properly payable to its beneficiaries and is subject to a power to adjust or unitrust amount under state law or its governing document; this includes simple trusts, complex trusts that measure distributions relative to trust income, QTIP trusts, CRUTs, pooled income funds and trusts grandfathered from generation-skipping transfer (GST) taxes.
Many taxpayers may need to consider funding QTIP trusts with retirement assets.
Under the most common example equivalent to the standard QTIP trust, the QDOT will have the same "qualifying income interest for life" as other marital deduction QTIP trusts generally have.
40] Furthermore, recent letter rulings have approved the use of marital QTIP trusts in lottery planning.