How to Qualify for a QTIP Trust

QTIP trusts allow for large estate transfers between spouses. These trusts allow transfers to occur while allowing the deceased spouse to retain control. At the time of the surviving spouse's death, the trust property is transferred to the remaining beneficiaries designated by the first to die spouse. In order to qualify, it must fulfill the following requirements.

Unlimited marital deduction rule

The property transferred to the trust must qualify for the unlimited marital deduction. That means the property must be in the gross estate of the spouse transferring the property.

Surviving spouse must have authority

Second the surviving spouse must have authority to reinvest trust property into income producing assets. Additionally, during the lifetime of the surviving spouse, no one can appoint the property to anyone else other than the spouse. The surviving spouse will entitled to all of the income for his or her life and the income of the trust must be paid annually. That income must go to the surviving spouse's estate.

File form 706

Also, the first to die spouse must have an executor file form 706 from the IRS to elect the trust to be treated as a QTIP trust on the federal estate tax return.

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