A Qualified Terminable Interest Property trust is an irrevocable trust that qualifies for the marital deduction for estate tax purposes while giving the grantor control over ultimate distribution of assets. The surviving spouse receives all income during their lifetime, but the grantor designates who receives the principal after the spouse's death.
A QTIP trust lets you provide for your spouse after you die while ensuring your assets ultimately go to the people you choose (often children from a first marriage). Your spouse gets all the income from the trust for life, but when they die, the remaining assets go to your chosen beneficiaries, not theirs.
⏱ When you'll encounter this term
- Second marriages with children from previous relationships
- Estate planning with significant assets and estate tax concerns
- Wanting to provide for spouse without giving full control
- Planning to ensure children ultimately inherit family assets
"Dad set up a QTIP trust when he remarried. His new wife gets all the investment income for her life, but when she dies, the principal goes to us kids from his first marriage, not to her family."
⚖️ Compare: QTIP Trust vs Outright Bequest
Spouse receives income only. Grantor controls who gets remaining assets after spouse dies. Protects children's inheritance.
Spouse owns assets completely. Can spend, gift, or leave to anyone. Children have no guarantee of inheritance.
💡 Did you know?
QTIP trusts are primarily a U.S. estate planning tool designed for estate tax purposes. Australia doesn't have estate taxes, so QTIP trusts are rarely used here, though similar structures can be created for asset protection or blended family situations.