A QTIP trust enables you to pass property to a partner while retaining control over how the property is distributed.
A Qualified Terminal Interest Property (QTIP) Trust can be used when an individual wants the advantage of passing property to a living partner while keeping the right to decide how the property is ultimately distributed.
Joe, for example, would like Mary to have access to his assets after his death, as well as for his inheritance to profit from the marriage exemption he would receive if he donated his assets to Mary directly. Joe, on the other hand, does not want to take the risk that after his death, Mary will leave the property to heirs he does not like, such as her family or a new spouse. A QTIP trust can be used to claim the marriage exemption while maintaining control over who receives the property when the remaining partner passes.
Property can be moved into a trust for the advantage of the remaining partner if the QTIP trust criteria are fulfilled. The property will not be taxable in the inheritance of the partner who passes first due to the limitless marriage exemption that will be permitted for this unique type of trust. The surviving spouse must include the QTIP property in his or her inheritance, just as if the property were gifted to the living partner directly. However, the QTIP trust rules (rather than the remaining spouse) will determine how the QTIP assets are distributed upon the demise of the living partner.
