QTIP Trust

The Qualified Terminable Interest Property Trust, or QTIP Trust, is a type of marital trust that provides a way for the first spouse to die to use the unlimited Marital Deduction yet still control the ultimate disposition of the estate assets after the death of the second spouse.

Major Characteristics of a QTIP Trust

A QTIP trust is usually established in the will or revocable living trust in order to take advantage of the marital deduction.
At the first death, the property is placed in a marital trust in such a way that the property is subject to estate taxation at the death of the surviving spouse.
All income from the trust must be paid out at least annually to the surviving spouse.
Principal may be used to provide for the surviving spouse’s health, maintenance and support.
If specified in the will, the surviving spouse may be given a limited power of appointment over the principal of the estate to distribute the proceeds among a designated class of beneficiaries.

Benefits of a QTIP Trust

The surviving spouse can receive all income generated by the trust.
A QTIP trust provides the first spouse to die with control over the final distribution of the estate – even if the surviving spouse has children from a prior marriage or remarriage.
Protects against possible spendthrift habits of the surviving spouse while providing income and possibly principal to provide for the spouse's needs.
The surviving spouse's creditors can not invade the trust to pay the spouse's debts.
The trust allows management of the assets by a trustee designated by the grantor (the first to die). This often provides the grantor peace of mind knowing that the spouse will be provided with professional management of the assets.