Qualified Terminable Interest Property (Q-Tip) Trust

Qualified terminable interest property trust, which allows assets to be transferred between spouses. The grantor of a Q-tip trust directs income from the assets to his or her spouse for life but has the power to distribute the assets upon the death of the spouse. Such trusts qualify the grantor for the unlimited marital deduction if the spouse should die first.

A Q-tip trust is often used to provide for the welfare of a spouse while keeping the assets out of the estate of another (such as a future marriage partner) if the grantor dies first.

Strategy providing that all income from assets in trust be paid at least annually for the life of the surviving spouse. This trust, which prohibits transfer of any assets to anyone else, can provide for the surviving spouse to will the property to one or more individuals among a group previously designated by the deceased spouse.

Strategy that provides that all income from assets in trust be paid at least annually for the life of the surviving spouse. This trust, which prohibits transfer of any assets to anyone else, can provide for the surviving spouse to will the property to one or more individuals among a group previously designated by the deceased spouse. For example, a husband establishes a Q TIP trust that gives his widow income for life. At the death of the wife, the corpus of the Q TIP trust will go the children, even though the corpus is part of the wife's estate. Since the husband elects how much of the estate is to be treated as Q TIP property, the estate tax strategy is to have only that portion of Q TIP property necessary to achieve zero estate death tax. See also Estate Planning, Estate Planning Distribution.