QTIP Trust Law and Legal Definition

QTIP trust refers to qualified terminal interest property trust. It is a testamentary trust established to transfer assets between spouses when one spouse dies. Under this trust the assets are considered part of the surviving spouse’s estate and are therefore not subject to the estate tax on the decedent spouse’s estate.

QTIP trust affords surviving spouses some declaration options on whether they wish to take full advantage of the marital deduction under most estate distribution schemes.

Requirements of a QTIP trust include:

(1) property must pass to surviving spouse from decedent,

(2) income must be distributed at least on an annual basis,

(3) no power of appointment in surviving spouse or others to benefit anyone except surviving spouse during surviving spouse's lifetime,

(4) donor must direct and/or executor must irrevocably elect on return, and

(5) property will be included in surviving spouse's estate for federal tax purposes.