Definition Qtip Trust With Example
Description
How to fill out Inter Vivos QTIP Trust With Principal To Donor's Children On Spouse's Death?
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FAQ
To create a QTIP trust, you'll make a QTIP election on IRS estate tax return form 706. List the chosen assets (called the ?qualified terminable interest property?) and their value on Part A of Schedule M. There are a few requirements: The surviving spouse must be a U.S. citizen.
John and Mary are in their second marriage. John has children from his first marriage and wants to ensure they inherit his estate after his and Mary's death. He creates a QTIP Trust which will provide Mary with income for life after his death, and upon Mary's death, the remaining assets will go to his children.
An Example of a QTIP Marital Trust He has two children from a previous marriage. The QTIP trust names his wife and his son as Co-Trustees. The Trust gives all the income earned therefrom to his wife, and also allows for principal distributions to her for her health, education, maintenance or support.
Under a QTIP trust, income is paid to a surviving spouse while the balance of the funds is held in trust until that spouse's death. At that point, the remainder is paid to the beneficiaries specified by the grantor.
Although complex in nature, a QTIP trust may be an important component of any estate plan where flexibility regarding the timing of estate tax payments and the assurance that assets will ultimately pass to your family are your primary objectives.