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Qualified Terminable Interest Property (QTIP) Trust

What is a 'Qualified Terminable Interest Property (QTIP) Trust'

A qualified terminable interest property (QTIP) trust is a type of trust that enables the grantor to provide for a surviving spouse, and also to maintain control of how the trust's assets are distributed once the surviving spouse dies. Income, and sometimes principal, generated from the trust is given to the surviving spouse to ensure that the spouse is taken care of for the rest of her life.

Explaining 'Qualified Terminable Interest Property (QTIP) Trust'

This type of trust is commonly used by individuals who have children from another marriage. QTIPs enable the grantor to look after his current spouse and ensure that the assets from the trust are then passed on to beneficiaries of his choice, such as the children from the grantor's first marriage.

Trustee Appointments

A minimum of one trustee must be appointed to manage the trust, though multiple individuals or organizations may be named simultaneously. The trustee, or trustees, will be responsible for controlling the trust and will also have authority over how the trust’s assets are managed. Examples of possible trustees include, but are not limited to, the surviving spouse, a financial institution, an attorney, and other family members or friends.

Spousal Payments

The surviving spouse named within a QTIP receives payments from the trust based on the income the trust is generating, similar to the issuance of stock dividends. As the surviving spouse is never the true owner of the property, a lien cannot be put against the property within the trust or the trust itself. Payments will be made to the spouse for the rest of her life. Upon death, the payments cease, as they are not transferable to another person. The assets in the trust then become the property of the listed beneficiaries.

Qualified Terminable Interest Property and Taxation

The property within the QTIP providing funds to a surviving spouse qualifies for marital deductions, meaning the value of the trust is not taxable after the first spouse’s death. Instead, the property becomes taxable after the second spouse's death, with liability transferring to the named beneficiaries of the assets within the trust.


Further Reading


Qualified Terminable Interest Property: Discussion of the Alternative Bequest Approach in Clayton v. Commissioner
heinonline.org [PDF]
… power over Trust "B" assets which would prevent trust "B" assets from being eligible to be … has no concern as to spouse's rights in property which does not qualify for the … In the case of qualified terminable interest property the property is treated as passing to the surviving spouse …

Gift Tax on QTIP Transfer Included in Gross EstateGift Tax on QTIP Transfer Included in Gross Estate
www.questia.com [PDF]
… power over Trust "B" assets which would prevent trust "B" assets from being eligible to be … has no concern as to spouse's rights in property which does not qualify for the … In the case of qualified terminable interest property the property is treated as passing to the surviving spouse …

Trust Assets Were QTIP Despite Limit on Spouse's Right to Stub Income: Estate of Shelfer v. CommissionerTrust Assets Were QTIP Despite Limit on Spouse's Right to Stub Income: Estate of Shelfer v. Commissioner
www.jstor.org [PDF]
… power over Trust "B" assets which would prevent trust "B" assets from being eligible to be … has no concern as to spouse's rights in property which does not qualify for the … In the case of qualified terminable interest property the property is treated as passing to the surviving spouse …

QTIP Created under State Law Not Federally BindingQTIP Created under State Law Not Federally Binding
www.questia.com [PDF]
… power over Trust "B" assets which would prevent trust "B" assets from being eligible to be … has no concern as to spouse's rights in property which does not qualify for the … In the case of qualified terminable interest property the property is treated as passing to the surviving spouse …

The Quandary of Executors Who Are Asked to Plan the Estates of the Dead: The Qualified Terminable Interest Property ElectionThe Quandary of Executors Who Are Asked to Plan the Estates of the Dead: The Qualified Terminable Interest Property Election
heinonline.org [PDF]
… power over Trust "B" assets which would prevent trust "B" assets from being eligible to be … has no concern as to spouse's rights in property which does not qualify for the … In the case of qualified terminable interest property the property is treated as passing to the surviving spouse …

A Half-Dozen Uses for a QTIPA Half-Dozen Uses for a QTIP
search.proquest.com [PDF]
… power over Trust "B" assets which would prevent trust "B" assets from being eligible to be … has no concern as to spouse's rights in property which does not qualify for the … In the case of qualified terminable interest property the property is treated as passing to the surviving spouse …

Marital Deduction Planning with QTIP after the 1984 Tax Reform Act: The Flexibility, and Some Problems, ContinueMarital Deduction Planning with QTIP after the 1984 Tax Reform Act: The Flexibility, and Some Problems, Continue
heinonline.org [PDF]
… power over Trust "B" assets which would prevent trust "B" assets from being eligible to be … has no concern as to spouse's rights in property which does not qualify for the … In the case of qualified terminable interest property the property is treated as passing to the surviving spouse …

Feminist Perspective on the Qtip Trust and the Unlimited Marital DeductionFeminist Perspective on the Qtip Trust and the Unlimited Marital Deduction
heinonline.org [PDF]
… power over Trust "B" assets which would prevent trust "B" assets from being eligible to be … has no concern as to spouse's rights in property which does not qualify for the … In the case of qualified terminable interest property the property is treated as passing to the surviving spouse …

Professional Courtesy ClaimsProfessional Courtesy Claims
www.questia.com [PDF]
… power over Trust "B" assets which would prevent trust "B" assets from being eligible to be … has no concern as to spouse's rights in property which does not qualify for the … In the case of qualified terminable interest property the property is treated as passing to the surviving spouse …


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