QTIP trust

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