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Marital Trust (QTIP)

The QTIP trust is a special kind of irrevocable testamentary trust that qualifies for the unlimited marital estate tax deduction and therefore incurs no transfer taxes at the time it is created. The trust is created in one spouse's will for the benefit of the surviving spouse during its term. The trust gives the spouse the right to all of its earned income for life. In addition, the trustee may be given the power to distribute trust principal to the spouse as necessary. When the trust terminates, typically at the death of the surviving spouse, the remaining principal is distributed to heirs, to charity, or to both according to the donor‘s wishes.

The major advantage of the marital trust is that the trust principal is subject to estate tax only once, at the death of the surviving spouse. Also, the QTIP trust is not included in the surviving spouse's probate estate, thereby reducing the estate settlement costs. The spouse who creates the trust also directs the disposition of the trust assets, but can allow the trustee the flexibility to invade trust principal for the benefit of the surviving spouse if necessary.

 

 

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