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 ?
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.
The QTIP 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 trust.
5 million of estate tax-exempt assets, with a QTIP portion for the benefit of the surviving spouse with the rest of the estate.