What is a QTIP Trust

A Qualified Terminable Interest Property (QTIP) Trust is a type of trust that enables the grantor to look after his or her current spouse. A QTIP trust achieves this goal by ensuring that the assets from the trust pass on to beneficiaries of the grantor’s choice. These beneficiaries can include children from a grantor’s past marriage. Furthermore, the living spouse is also supplied with a source of funds and limits death and gift tax burdens that would otherwise be passed on to the surviving spouse.

Why Use a QTIP Trust?

There are two main reasons why a married couple would choose to establish a QTIP trust. First, it may be unclear what your estate tax situation will be at the time the trust is created. This will allow your Executor to choose a plan that minimizes the total estate tax paid. Furthermore, this option is especially useful if your surviving spouse owns significant personal assets. If this is the case, your Executor can use graduated tax brackets that ultimately reduce the overall tax paid on the estate.

The other reason why a QTIP trust can be useful is that you can limit the power or ownership rights that your spouse has over the trust assets once you pass away. For example, QTIP Trusts prevent assets from transferring to a surviving spouse that will use them with a new spouse, should they decide to remarry. Furthermore, this type of trust is useful for second marriages since you may want to ensure that the amounts held in the trust will ultimately pass to your children or family and not the children or family of your current spouse.

Contact our DC Law Office

For more information about QTIP Trusts or our estate planning practice, contact us at 202-803-5676 or directly schedule a consultation with one of our estate planning attorneys.