The QTIP Election Another advantage of a QTIP trust is that is provides some flexibility for the surviving spouse. To create the QTIP trust, the executor must make a “QTIP election” on the estate tax return that’s filed for the estate of the first spouse to die.

Can surviving spouse be trustee of QTIP trust?

QTIP trust assets are subject to estate tax at the death of the surviving spouse. Your executor or trustee must elect QTIP treatment for the trust. Depending on the principal invasion standard and nature of assets in the trust, the surviving spouse may be able to act as her own trustee over the QTIP.

What is a QTIP trust and when should it be used?

QTIP trusts are frequently used when there are children from a prior marriage and one spouse has considerably more assets than the other. Upon death of the surviving spouse, assets pass to the beneficiaries selected by the first spouse.

Is a QTIP trust a living trust?

If the collective total assets of a couple exceed the threshold for Death Taxes, an AB or QTIP Trust is probably the best type of Living Trust for the couple. Then the Trust assets are divided into two halves and allocated one half to the A Trust and one half to the B Trust.

Can a QTIP trust distribute principal?

QTIP Trust Requirements No one (not even the surviving spouse) can have the power to distribute any principal from the trust during the spouse’s lifetime to anyone other than the spouse. The trust income cannot be terminated by remarriage or any other event.

What is the difference between a marital trust and a QTIP trust?

While a QTIP does offer more overall direction of the funds, a marital gift trust has the flexibility of not mandating that the surviving spouse take annual allotments. Instead, they are able to leave principal in the trust if so desired, which may continue to increase the total assets through interest over time.

What is the difference between a QTIP trust and a bypass trust?

Unlike a bypass trust, the surviving spouse has complete control over the property and can spend it, bequeath it to beneficiaries, or give it away as gifts. No estate tax is imposed on this property because everything left to the surviving spouse is free from estate tax.

What is the benefit of a QTIP trust?

A qualified terminable interest property (QTIP) enables the grantor to provide for a surviving spouse and maintain control of how the trust’s assets are distributed once the surviving spouse dies.

What is the difference between a bypass trust and a QTIP trust?

It is one part of a bypass trust, also known as an AB trust. Unlike with a QTIP trust, the surviving spouse typically has complete control over a marital trust, including use of the trust assets and final say on designating who the final beneficiaries are.

What is the difference between an AB trust and a QTIP trust?

B Trusts also do three things differently than A Trusts and QTIP Trusts: They keep the trust-owned assets out of the surviving spouse’s estate, trust-generated income does not need to be paid out, and anybody can be a beneficiary of trust assets during the lifetime of the surviving spouse.

What happens to a QTIP trust after a spouse dies?

At the death of the surviving spouse, the trust assets are included in the gross estate of the surviving spouse for estate tax purposes, but the surviving spouse does not need to have any power over the property. The first spouse to die can specify who receives the property after the second death.

Can a QTIP trust be used to buy real estate?

If the client’s children have the insurance proceeds and the right to buy the business or real estate, then the life insurance proceeds used to purchase the assets can be used to fund the QTIP trust.

How is the QTIP trust benefiting the blended family?

The QTIP trust allows married clients to “have their cake and eat it, too,” because it can provide an income to the spouse and yet make sure that the wealth remaining upon the death of the spouse is distributed (or held in trust) for the client’s own children, or other beneficiaries selected by the client.

Can a total return unitrust be a QTIP trust?

Estate tax regulations now allow such a “total return unitrust” to qualify as a QTIP trust if the unitrust interest qualifies as the “income” of the trust under state law.