What Role Does a QTIP Trust Play in Estate Planning?

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QTIP Trust
KS and MO Attorney Kyle E Krull

Written by Kyle Krull

Attorney & Counsellor at Law Kyle Krull is president of the Law Offices of Kyle E. Krull, P.A., an Estate Planning Law Firm located in Overland Park, KS. Estate Planning Attorney Kyle Krull has provided continuing education instruction to attorneys, accountants, and financial professionals at local, state, and national programs.

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POSTED ON: March 6, 2024

Although QTIP trusts provide both asset preservation and estate tax benefits, working with an experienced estate planning attorney is essential for ensuring this estate planning tool functions properly. 

A QTIP Trust can be beneficial for blended families. 

When most people hear QTIP, they typically do not think of trusts. 

Go ahead and admit it.

Did the image of a small stick with cotton on both ends come to mind? 

Spoiler alert.

While this product has various uses for health and beauty, it is of little use in estate planning. 

In contrast, a QTIP trust can help protect both you and your loved ones. 

What Is a QTIP Trust?

The QTIP Trust acronym stands for a Qualified Terminable Interest Property Trust.

This type of trust is used in estate planning for greater asset control. 

With QTIP Trusts, one spouse can leave assets to be used by the surviving spouse while simultaneously retaining control over the asset distribution upon the death of the surviving spouse.

Common scenarios in which this trust is used are when the trustmaker has specific objectives regarding asset distribution or the protection of inheritances for children from a previous marriage. 

What does this mean? 

The terms of the trust can not be easily changed or terminated. 

The trust will hold assets to provide for a surviving spouse. 

After both spouses have died, the assets are distributed per the wishes and terms outlined by the first spouse, the trustmaker. 

How Does a QTIP Trust Work?

QTIP Trusts fall under the category of irrevocable trusts

The terms of an irrevocable trust cannot be easily changed or terminated. 

The QTIP Trust will hold assets to provide income for a surviving spouse and discretionary principal if authorized by the trust provisions. 

After both spouses have died, the assets are distributed per the wishes and terms outlined by the first spouse. 

What are the Benefits of a QTIP Trust?

Providing for a Surviving Spouse

Spouses rely on each other to meet each other's needs. 

Sometimes, both spouses work full-time. 

Other times, one spouse will work while the other manages the household.

Even so, each person supports the other and the family unit. 

A QTIP Trust ensures the surviving spouse will be cared for financially after the death of the first spouse. 

Such actions can provide peace of mind and stability after a staggering loss. 

Control Over Asset Distribution

Although spouses want to provide for the other, they often do not want to leave their children vulnerable if the surviving spouse remarries. 

With a QTIP Trust, the trustmaker who initiates its creation and funding includes trust terms to govern the distribution of assets after the death of the surviving spouse. 

Often this will funnel assets to the children shared in the marriage while excluding any future spouses or stepchildren.

When trusts are not in place, parents can unintentionally disinherit their own children while providing for perfect strangers. 


Do QTIP Trusts Qualify for a Marital Deduction?

The answer is yes. 

Assets owned by a QTIP Trust will qualify for the marital deduction. 

What does this mean? 

These assets will not be subject to the federal estate tax after the death of the first spouse. 

Estates can realize significant tax savings as a result. 

What is Involved in Setting Up a QTIP Trust?

QTIP Trusts are not simple legal documents. 

While all estate planning documents require extensive legal expertise and careful planning, some may consider irrevocable trusts to have higher stakes as they cannot be easily changed.

Although trusts must be drafted and signed like other estate planning documents, they require the additional step of transferring assets into the trust. 

To ensure your QTIP Trust is set up correctly, you should work with an experienced estate planning attorney.

What are the Differences Between a QTIP Trust and a Marital Trust?

Both of these trusts provide for the surviving spouse in a marriage. 

While a standard marital trust often gives more authority to the surviving spouse to make decisions, the QTIP Trust establishes more control and limits flexibility in the eventual distribution of assets beyond the surviving spouse. 

What are the Estate Tax Implications of QTIP Trusts?

For larger estates, an advantage of QTIP Trusts is their ability to reduce estate taxes. 

How do these trusts accomplish this benefit?

Because the trusts take advantage of the marital deduction, estate taxes can be delayed until after the death of the surviving spouse.

Is a QTIP Trust the Right Choice for Your Estate Plan?

No experienced estate planning attorney can answer this without fully understanding your specific estate planning goals and family situation. 

Generally, these trusts can benefit those who want to provide for their surviving spouse while maintaining control over the future of the assets and their distribution.

What are the Tax Benefits and Limitations of a QTIP Trust?

QTIP Trusts do not solve all possible tax issues. 

They, too, are subject to specific rules and limitations. 

Understanding what QTIP Trusts can and cannot do will help you maximize the advantages these trusts can provide. 

Do QTIP Trusts Work for Blended Families?

A QTIP Trust can benefit blended families where spouses bring in children from previous marriages. 

These trusts allow you to provide for your spouse and children from your previous marriage.

Should I Consult with an Estate Planning Attorney?

Although consulting with an experienced estate planning attorney is always advisable, attempting irrevocable trusts alone is certainly not recommended. 

The creation of a QTIP Trust involves complicated legal and tax elements. 

Working with an experienced estate planning attorney is essential to ensuring you have a trust with the proper structuring to accomplish your estate planning goals.

QTIP Trusts are versatile in their estate planning functions and can be especially useful where blended families or the possibility of future marriages arise.

What are the Key Takeaways regarding QTIP Trusts?

A QTIP Trust can provide financial security by creating an income for a surviving spouse while simultaneously allowing the trustmaker to dictate the terms of asset distribution after the death of the surviving spouse. 

Consequently, these are beneficial for blended families. 

Although QTIP Trusts provide asset preservation and estate tax benefits, working with an experienced estate planning attorney is essential to ensure this tool functions properly. 

If you are wondering whether a QTIP Trust would be the best tool for your family dynamics and personal goals, contact an experienced estate planning attorney to discuss your circumstances. 

Whether you need a QTIP Trust or not, estate planning is essential to protecting what you have and those you love.

This post is for informational purposes only and does not provide legal advice. You should contact an attorney for advice concerning any particular issue or problem. Nothing herein creates an attorney-client relationship between Harvest Law KC and the reader.

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