Which of the following is true about a QTIP Trust?

Which of the following is true about a QTIP Trust?

• A. QDOT
• B. GRAT
• C. CRT
• D. QTIP

Answer: (D)

A QTIP trust is a tool used in estate planning to provide income for a surviving spouse while preserving tax advantages for the first death. It stands for Qualified Terminable Interest Property, and its power comes from letting the surviving spouse receive all the trust’s income for life, with the principal remaining in the trust and the eventual remainder going to beneficiaries chosen by the first spouse to die. Because the surviving spouse has a qualifying income interest for life, the property can still qualify for the unlimited marital deduction, meaning it isn’t taxed in the transfer at the first death. At the surviving spouse’s death, the remaining assets pass to the designated beneficiaries. The other terms refer to different planning tools with distinct purposes: a QDOT is for treating a decedent’s property as eligible for the marital deduction when the surviving spouse is not a U.S. citizen; a GRAT uses a grantor’s retained interest to move wealth with potentially reduced gift tax; a CRT is a charitable remainder trust that benefits charity while paying income to non-charitable beneficiaries.

A QTIP trust is a tool used in estate planning to provide income for a surviving spouse while preserving tax advantages for the first death. It stands for Qualified Terminable Interest Property, and its power comes from letting the surviving spouse receive all the trust’s income for life, with the principal remaining in the trust and the eventual remainder going to beneficiaries chosen by the first spouse to die. Because the surviving spouse has a qualifying income interest for life, the property can still qualify for the unlimited marital deduction, meaning it isn’t taxed in the transfer at the first death. At the surviving spouse’s death, the remaining assets pass to the designated beneficiaries.

The other terms refer to different planning tools with distinct purposes: a QDOT is for treating a decedent’s property as eligible for the marital deduction when the surviving spouse is not a U.S. citizen; a GRAT uses a grantor’s retained interest to move wealth with potentially reduced gift tax; a CRT is a charitable remainder trust that benefits charity while paying income to non-charitable beneficiaries.