Your 50-year-old client has a $17,000,000 estate and asks about a bypass trust funded with the full exemption amount, with the wife as income beneficiary and the children as remainder beneficiaries. Which type of trust would you recommend?

Your 50-year-old client has a $17,000,000 estate and asks about a bypass trust funded with the full exemption amount, with the wife as income beneficiary and the children as remainder beneficiaries. Which type of trust would you recommend?

• A. Grantor Retained Income Trust
• B. Trust (GRIT)
• C. Qualified Terminable Interest Property (QTIP) trust
• D. Qualified Personal Residence Trust

Answer: (C)

In estate planning, you want a vehicle that provides the surviving spouse with income for life while ensuring the children will ultimately receive the assets. A Qualified Terminable Interest Property (QTIP) trust does exactly that. It pays all the income to the surviving spouse for life (the spouse is the income beneficiary), and after the spouse dies, the trust assets pass to the children as the remainder beneficiaries. This structure also lets you take advantage of the marital deduction on the first death, helping with tax efficiency upfront, while preserving control over how the assets eventually pass to the next generation. The other options don’t fit this specific setup as cleanly. A Grantor Retained Income Trust typically freezes value for transfer to younger generations but doesn’t center on providing a lifetime income to the spouse with a defined remainder to the children. A Qualified Personal Residence Trust focuses on transferring a residence to heirs with tax advantages, not on providing ongoing spousal income and a remainder to children. A GRIT also freezes value but is generally used for shifting future appreciation to heirs rather than ensuring a spouse receives income for life with the remainder going to the children. So, the choice that best combines lifetime income for the wife and a clear path for the children to receive assets after her death is the Qualified Terminable Interest Property trust.

In estate planning, you want a vehicle that provides the surviving spouse with income for life while ensuring the children will ultimately receive the assets. A Qualified Terminable Interest Property (QTIP) trust does exactly that. It pays all the income to the surviving spouse for life (the spouse is the income beneficiary), and after the spouse dies, the trust assets pass to the children as the remainder beneficiaries. This structure also lets you take advantage of the marital deduction on the first death, helping with tax efficiency upfront, while preserving control over how the assets eventually pass to the next generation.

The other options don’t fit this specific setup as cleanly. A Grantor Retained Income Trust typically freezes value for transfer to younger generations but doesn’t center on providing a lifetime income to the spouse with a defined remainder to the children. A Qualified Personal Residence Trust focuses on transferring a residence to heirs with tax advantages, not on providing ongoing spousal income and a remainder to children. A GRIT also freezes value but is generally used for shifting future appreciation to heirs rather than ensuring a spouse receives income for life with the remainder going to the children.

So, the choice that best combines lifetime income for the wife and a clear path for the children to receive assets after her death is the Qualified Terminable Interest Property trust.