A QTIP Trust — short for Qualified Terminable Interest Property Trust — is a specialized estate planning tool often used by married couples, particularly in second marriages or blended families.
Its primary purpose is to:
- Provide income and financial security to a surviving spouse
- Preserve assets for chosen beneficiaries (such as children from a prior marriage)
- Control how assets are distributed after both spouses pass away
How Does a QTIP Trust Work?
A QTIP Trust is created as part of a married person’s estate plan.
When the first spouse dies:
- Assets are placed into the QTIP Trust.
- The surviving spouse receives income from the trust (and sometimes limited access to principal).
- The surviving spouse does not control where the remaining assets go after their death.
- When the surviving spouse later passes away, the remaining trust assets go to the beneficiaries chosen by the first spouse.
This structure allows the first spouse to maintain ultimate control over who inherits the remaining property.
Why Is It Called “Qualified Terminable Interest Property”?
The name comes from federal estate tax law.
Normally, to qualify for the marital deduction (which allows assets to pass to a spouse without immediate estate tax), the spouse must receive full ownership.
A QTIP Trust is an exception.
Even though the surviving spouse does not receive full ownership of the assets, the trust still qualifies for the unlimited marital deduction — as long as certain legal requirements are met.
This means:
- No estate tax is due when the first spouse dies.
- Estate tax is deferred until the second spouse passes away.
When Is a QTIP Trust Commonly Used?
Second Marriages
A QTIP Trust is frequently used in blended family situations, where one spouse wants to:
- Ensure their current spouse is financially secure
- Protect children from a prior relationship
- Prevent the surviving spouse from changing the ultimate inheritance plan
Without a QTIP Trust, the surviving spouse could potentially leave everything to someone else.
Asset Control and Protection
A QTIP Trust also provides:
- Protection from mismanagement
- Creditor protection (depending on structure)
- Oversight by a trustee
What Does the Surviving Spouse Receive?
Under federal law, the surviving spouse must receive:
- All income from the trust, at least annually
Depending on how the trust is drafted, the spouse may also have limited access to principal for:
- Health
- Education
- Maintenance
- Support
However, the spouse cannot redirect the remaining assets at death.
Estate Tax Considerations
A QTIP Trust:
- Qualifies for the marital deduction at the first spouse’s death
- Is included in the surviving spouse’s estate for estate tax purposes
It is often used in combination with other estate tax planning strategies.
Advantages of a QTIP Trust
- Provides financial security to a surviving spouse
- Preserves assets for children or other beneficiaries
- Defers estate taxes
- Maintains control over ultimate distribution
- Useful in blended family situations
Are There Any Downsides?
- It is irrevocable after death
- Requires careful drafting
- May involve trustee administration costs
- Subject to future estate tax law changes
Proper legal guidance is essential.
The Bottom Line
A QTIP Trust is a powerful estate planning tool that balances two important goals:
- Taking care of a surviving spouse
- Protecting long-term inheritance plans
It is particularly valuable in second marriages and blended families where asset control matters.
If you are considering estate planning and want to ensure both your spouse and your children are protected, discussing whether a QTIP Trust fits your situation is an important next step.
