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.

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References in periodicals archive

Often, a qualified terminable interest property trust (QTIP) is designated as beneficiary under these or similar circumstances to preserve the estate tax marital deduction and accomplish the nontax estate planning goals.

Designating a QTIP as the Beneficiary of an IRA Under Revenue Ruling 2000-2

Example 1: A qualified terminable interest property trust is meant to qualify for the marital deduction.

Final regs. define "income" under sec. 643

For instance, in a qualified terminable interest property trust, all income requires distribution, at least annually.

Determining whether IRA distributions to a trust are income or principal

Two methods by which property can be transferred within a family to minimize estate taxes are use of a qualified personal residence trust or a qualified terminable interest property trust. This article discusses recent court decisions and rulings in each area and suggests why future planning strategies using either of these methods may have to be modified.

Recent developments in QPRTs and QTIPs

1.1361-1(j)(4) allows a qualified terminable interest property trust to function as a QSST, if it otherwise qualifies.

S corporation current developments: S corporation eligibility, elections and terminations; operations; reorganizations; and proposed legislative changes

This will make inter vivos funding of an irrevocable qualified terminable interest property trust difficult.

Gift and estate taxation: noncitizen spouse issues

In addition, it was concerned that allowing existing trusts to default or "opt" into these new definitions of income would adversely affect their tax status as qualified terminable interest property trusts qualifying for the estate tax deduction, charitable remainder unitrusts, qualified S corporation trusts, grandfathered generation-skipping trusts or intentionally defective grantor trusts.

New sec. 643 trustee capital gain and loss carryout regs

The timeless theme of financial planning for wealth preservation runs through this month's feature articles, from the impact of a recent IRS ruling on qualified terminable interest property trusts (QTIP) to using family limited partnerships (FLP).

Millennium Series

Often, these trusts function in tandem with marital trusts (e.g., qualified terminable interest property trusts) that defer (but do not eliminate) estate tax.

Planning implications of the TRA '97's increase in the unified credit