The Benefits of a QTIP Trust

The QTIP trust is one of the most useful tools for building your estate plan. The acronym stands for Qualified Terminable Interest Property and is straight out of the Internal Revenue Code. This is the kind of trust that qualifies for the federal estate tax* marital deduction by giving your spouse income for life but no control over the principal.

How a QTIP Trust Can Help

A traditional estate trust that qualifies for the marital deduction can protect your principal during your surviving spouse's lifetime. Under this plan, you must give him or her the right to choose the eventual beneficiaries at his or her own death. The QTIP trust, however, ensures that your wishes are carried out. It qualifies for the marital deduction without ever giving your spouse control over principal.

The trust income will be paid to your spouse for life. And you can give your trustee discretion to supplement this from principal if needed to maintain a proper standard of living. After your spouse's lifetime, the balance will be distributed to those you have named.

For greater flexibility, you can give your spouse the power to adjust the shares passing to children, grandchildren or charitable organizations like Gustavus Adolphus College.

For more information, please contact Jackie Peterson at 507-933-7543 or jpeters9@gustavus.edu.

*Currently federal estate taxes are repealed for any deaths that occur in the calendar year 2010. In 2011 and beyond, estate taxes are reinstated in full. Congress has declared its intent to change the laws to reinstate federal estate taxes sometime in 2010. What the final legislation will look like is unknown at this point. Check back for future updates.