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 ?
10) Very often, two QTIP trusts are established to maximize the decedent's generation-skipping transfer (GST) tax exemption; generally speaking, a "reverse-QTIP" election is made under I.
Both Millers have wills calling for all of their assets to go into QTIP trusts.
The surviving spouse's $3,500,000 exemption amount may then be used to protect the remaining $3,500,000 of property, and the entire $7,000,000 has escaped GST tax (assuming separate QTIP trusts of $3,500,000 and $500,000 are created).
QTIP trusts combined with disclaimers have been increasingly used after EGTRRA 2001.
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.
When one spouse dies, the credit shelter and QTIP trusts become irrevocable, providing the surviving spouse with income and principal for support and maintenance--but preventing the surviving spouse from redirecting trust assets to his or her own children or other outsiders When the surviving spouse dies, assets remaining in trust revert to the children of the first deceased spouse.
In addition, the trustee would also be instructed to pay any taxes attributable to the QTIP trusts first from the nonexempt QTIP, upon the death of the surviving grantor.
Many taxpayers may need to consider funding QTIP trusts with retirement assets.
However, Revenue Ruling 89-89 seemed to indicate that there was a difference for IRAs and qualified retirement plans, muddying the water and seemingly creating a marital deduction requirement that applied only to IRAs and qualified plans payable to QTIP trusts.
Like credit shelter or disclaimer trusts, QTIP trusts can create tension, because the interests of multiple beneficiaries must be considered.
In order to maximize the utility of this technique, the A-B or A-B-QTIP trust device can be designed to pass to the A trust or to the A and QTIP trusts together exactly enough property to reduce the federal estate tax in the estate of the first spouse to die to the lowest desired amount--even to zero.