QTIP trust
Qualified terminable interest property trust: surviving spouse must receive all trust income for life; no one else may receive principal during spouse's life. Executor elects QTIP treatment on Form 706. Gives marital deduction at first death while first decedent names remainder beneficiaries.
| Facet | Detail |
|---|---|
| Also called | QTIP, qualified terminable interest property trust, terminable interest marital trust |
| A-B / A-B-C role | Marital trust in A-B; often C trust in A-B-C after bypass funded |
| When created | At first death |
| Revocable | No |
| Inter vivos / testamentary | Testamentary sub-trust (common) or less often inter vivos QTIP |
| Typical beneficiaries | Spouse (income for life); children or others as remainder |
| Primary purpose | Marital deduction + control who gets assets after spouse dies |
| Marital deduction | Yes — § 2056(b)(7) QTIP election required |
| Uses estate exclusion | No |
| In survivor's estate | Yes — included at second death |
| Basis step-up | First death and again at spouse's death |
| Income tax | Trust 1041; spouse taxed on distributed income |
| Crummey powers | No |
| GST / dynasty | Remainder can be GST-exempt with allocation |
| Spendthrift | Remainder beneficiaries protected; spouse has income rights |
| See-through (IRA) | Generally avoid as IRA beneficiary |
| Key tradeoff | Blended-family control vs QTIP assets taxed in survivor's estate later |
Illinois allows a separate Illinois QTIP election on Form 700.