Marital Deduction or QTIP Trusts

Of the many common types of trusts, the marital deduction or qualified terminable interest property (QTIP) trust is only used for certain situations. This type of trust is designed not to avoid federal estate taxes upon the death of a surviving spouse, but rather to provide management and control of assets for a surviving spouse after the first spouse dies.

The trust is designed so that all assets in the trust qualify for the unlimited marital deduction, as would outright gifts to a spouse. Thus, the trust avoids estate taxes upon the death of the first spouse. The real advantage of the trust is the ability to have an independent trustee control and manage the assets for the surviving spouse, and the ability to determine the contingent beneficiaries, who usually are the children.

The trust frequently is used when the trustor has children from a prior marriage, and the trustor wants to ensure that a certain portion of his or her estate will pass to children from the prior marriage. This cannot always be assumed when the property is left outright to the surviving spouse. The trust also is used when professional management of the assets is desirable for the surviving spouse.