A marital trust set up to avoid estate tax on the first spouse's death. Although the disposition of the property is determined under the terms of the trust establish by the deceased spouse, the value of the trust's assets are not subject to taxation until the surviving spouse's death. During his/her lifetime, the surviving spouse receives all income from the principal and, in some cases, has access to the principal.
allows an individual to provide a surviving spouse with income from the trust for the remainder of the spouse's lifetime. However, upon the death of the surviving spouse, the assets remaining in the trust pass to the beneficiaries named in the first decedent's will, most often, the children.
A terminable interest that will qualify for the marital deduction, if an appropriate election is made by the donor or executor. This type of vehicle is frequently used to avoid any transfer tax upon the death of the first spouse; it provides the surviving spouse with all income from the property (and access to the principal, under certain conditions) during his or her life, but it enables the deceased spouse to retain control over the ultimate disposition of the property.
This is a special type of trust used most frequently by a married couple where one spouse's assets exceed $675,000. The Q-TIP Trust allows the survivor to enjoy the income of the trust, but preserves assets for the first deceased spouse's family or other heirs. Although it restricts the surviving spouse's use of the trust estate after the death of the first spouse, it is an effective method of deferring estate taxation until the death of a second spouse.
A special trust in which the surviving spouse is entitled to all income from assets during his or her lifetime but cannot alter the disposition of principal from the grantor's wishes. Upon the surviving spouse's death, assets pass to beneficiaries named by the grantor. QTIPs can be useful in second marriages where there are children from a previous marriage.
A trust designed to give a surviving spouse income and some principal to live on, with the balance going to the named beneficiaries (usually children) upon the surviving spouse's death. A QTIP qualifies for the unlimited marital deduction.
A trust that allows a surviving spouse to receive income generated from the trust, but actual distribution of the trust's property is made to other beneficiaries such as the grantor's children.
A type of trust that is frequently used to provide for the welfare of a spouse. It keeps the assets out of the estate of another (such as a future marriage partner) if the grantor dies first. It allows assets to be transferred between spouses. The grantor of a Q-Tip trust directs the income generated from the assets to their spouse for life, but has the power to distribute the assets upon the death of the spouse. The trust qualifies the grantor for unlimited marital deductions if the spouse dies first.