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Types of Trusts

QTIP TRUSTS: “QUALIFIED TERMINABLE INTEREST PROPERTY”

A QTIP (Qualified Terminable Interest Property) trust is a trust for the life of a surviving spouse that provides him or her with income that qualifies for the marital tax deduction. Man and ChildA QTIP trust is primarily meant to provide a surviving spouse with the ability to manage and control assets after the first spouse dies, while ensuring that the first spouse’s beneficiaries will not be disinherited.

If you or your spouse is a U.S. citizen, you can leave him or her an unlimited amount of assets with no estate taxes when you die. This is called the “unlimited marital deduction.” The government allows this deduction because it plans to collect the taxes when your surviving spouse dies. A QTIP trust qualifies for this “marital deduction” as long as the trustee or executor of the decedent’s estate makes the necessary election on the estate tax return, so that the federal estate tax is reduced or avoided on the death of the first spouse.

The QTIP trust is also particularly useful for couples who have been married before and/or have children from prior unions because each spouse can set forth the disposition of the principal of the property in the QTIP trust after the death of the surviving spouse to go to his or her desired beneficiaries, thus leaving each spouse with the peace of mind that their beneficiaries will still receive an inheritance.

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Daniela Lungu

Law Offices of Daniela Lungu
4695 Chabot Drive, Suite 200
Pleasanton, CA 94588

Phone: (925) 558-2710
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