The balance of the estate not passing to the family trust would be placed in a QTIP
trust, which would qualify for a marital deduction but be included in the survivor's gross estate.
election for the credit shelter trust was not necessary, because no estate tax would have been imposed whether or not the QTIP
election had been made for that trust.
22) In this situation, the trustee was authorized to invade a marital trust (for which only a partial QTIP
election was made) in order to pay to, or for the benefit of, the transferee spouse any amounts deemed "necessary or desirable, consistent with [transferee spouse's] accustomed standard of living, for her health, maintenance, or support.
Example 1: Dwight Emerson's will calls for the establishment of a QTIP
trust, to be funded with most of his assets.
IRC section 2519 provides that a gift of any part of the qualifying QTIP
income interest will be treated as a transfer of the entire QTIP
property [Treasury Regulations section 25.
The first-to-die spouse in this case left assets to the surviving spouse in a QTIP
trust to take advantage of the estate tax marital deduction.
Apparently, the ETIP rules do not apply if a reverse QTIP
election (see below) is made.
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.
Carefully review how the Marital and Credit Shelter Shares are to be divided, and how a QTIP
Trust can strengthen the legacy to the children of the previous marriage.
An executor can elect to treat an IRA and a trust as QTIP
if (1) the trustee of the trust is the beneficiary of the IRA, (2) the surviving spouse can compel the trustee to withdraw all income earned by the IRA at least annually and distribute that amount to the spouse, and (3) no person has the power to appoint any part of the trust to any person other than the spouse.
The remaining $6,500,000 is placed in the QTIP
5 million of estate tax-exempt assets, with a QTIP
portion for the benefit of the surviving spouse with the rest of the estate.