Clayton QTIP
A funding formula, not a different trust species: allocate the exclusion amount to bypass (B) first, pour the balance into QTIP. Adapts if estate size changes between drafting and death. The resulting marital trust is still a QTIP with the same tax traits.
| Facet | Detail |
|---|---|
| Also called | Clayton election, formula QTIP, bypass-first marital plan |
| A-B / A-B-C role | Defines how B and C (or marital QTIP) are funded |
| When created | Formula executes at first death |
| Revocable | Formula in revocable RLT; sub-trusts irrevocable once funded |
| Inter vivos / testamentary | Testamentary funding formula in RLT/will |
| Typical beneficiaries | Same as bypass + QTIP combined |
| Primary purpose | Automatically optimize bypass vs marital split |
| Marital deduction | On QTIP portion only |
| Uses estate exclusion | On bypass portion |
| In survivor's estate | QTIP portion yes; bypass portion no |
| Basis step-up | Bypass: one step-up; QTIP: two step-ups |
| Income tax | Per sub-trust (bypass + QTIP) |
| Crummey powers | No |
| GST / dynasty | Per sub-trust planning |
| Spendthrift | Per sub-trust |
| See-through (IRA) | Coordinate IRA beneficiaries separately from formula |
| Key tradeoff | Flexibility vs requires skilled drafting and executor coordination |