Qualified Terminable Interest Property Trust

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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 ?
Like credit shelter or disclaimer trusts, QTIP trusts can create tension, because the interests of multiple beneficiaries must be considered.
Provided there are sufficient assets to support the surviving spouse, it may be optimal for the trustee of the mari tal QTIP trust to distribute the marital QTIP assets to the surviving spouse.
8 TABLE 2 Contrast of the Availability of Wealth Transfer Strategies by Married and Unmarried Couples (4) WEALTH TRANSFER STRATEGY MARRIED UNMARRIED Lifetime Exemption $1 M Unified Tax Credit X X Unlimited Transfer (Marital Deduction) X Annual Exclusion of $11,000 per Recipient X X Gift Splitting X Intestacy Rules Favoring Partner/Spouse X Community Property X Living Trust X X Tax Free Gift of Income Interest to Spouse via QTIP X Unlimited Charitable Deduction X X Charitable Donations Through a CRAT X X Favourable Social Security and Qualified Plan Distributions After Death of Spouse/Partner X
QTIP also includes guidance in how to apply process-monitoring tools to tool-qualification tasks.
Under the QTIP rules, a life interest granted to a spouse will not be treated as a terminable interest and the entire value of the property in which the spouse is granted an interest will qualify for the marital deduction.
A QTIP trust provides management of assets and access to income while limiting the ability of the beneficiary to consume large amounts of principal unless specifically provided for in the trust document.
The principal purpose of the proposed regulations is to extend the Commissioner's section 9100 authority to other than income taxes; the regulations were prompted by the occurrence of a substantial number of "blown" QTIP elections for estate tax purposes.
When the B trust was greater than the applicable exclusion amount for that year, the excess over the exclusion amount was transfer red to either a QTIP or martial trust--or it was used to enhance the A trust.
Alternatively, if they wish to take advantage of portability because they anticipate that upon the second of them to die they will not have an estate tax liability, and they want to take advantage of the step up in basis upon the death of the surviving spouse, perhaps they can make the by-pass trust a "QTIPable" trust, and possibly elect QTIP (24) treatment for the by-pass trust, if it is desirable and possible upon the first spouse's death.
For a married individual who died in 2010, the decision whether to file an estate tax return and make a QTIP election to obtain a marital deduction may depend on the anticipated amount of the estate tax exemption at the date of the surviving spouse's death.
Almost routinely, advisors encourage the use of a QTIP Trust as the preferred technique for blended families with higher net worth.
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.