What is a QTIP trust and how do you set it up?
Each spouse can set up a QTIP trust, leaving assets to the other in trust. When the first spouse dies, the survivor gets what’s called a „life estate“ in the assets that are left to the QTIP trust—that is, the survivor is entitled to any income the assets produce, and in the case of real estate, to its use.
Can a spouse be an executor of a QTIP trust?
The decision is officially in the hands of the person you name as the executor of your will, who may or may not be your spouse. To create the QTIP trust, the executor must make a “QTIP election” on the estate tax return that’s filed for the estate of the first spouse to die.
What is a qualified terminal Interest Property Trust?
A qualified terminal interest property (QTIP) trust supports a surviving spouse, thus qualifying for the unlimited marital deduction, while ensuring that the remaining trust property is distributed according to the decedent spouse’s instructions.
How does a surviving spouse get paid from a QTIP?
The surviving spouse named within a QTIP receives payments from the trust based on the income the trust generates, similar to the issuance of stock dividends. As the surviving spouse is never the true owner of the property, a lien cannot be put against the property within the trust or the trust itself.
Do noncitizens qualify for the QTIP tax deduction?
The marital deduction (the rule that lets surviving spouses inherit any amount from the deceased spouse free of estate tax) is key to the QTIP, and it doesn’t apply to noncitizens. You may want to consider another kind of trust, the QDOT or Qualified Domestic Trust, which may help you accomplish your tax-related goals.
What happens to a QTIP when the first spouse dies?
When the first spouse dies, the survivor gets what’s called a “life estate” in the assets that are left to the QTIP trust—that is, the survivor is entitled to any income the assets produce, and in the case of real estate, to its use. Only the surviving spouse can be named as the life beneficiary.