A QUALIFIED Terminable Interest Property, or QTIP, trust can provide income for your spouse, while also naming the ultimate beneficiaries of the trust’s assets. Sound like a bypass trust? It is—except a bypass trust makes use of your federal estate tax exclusion, while a QTIP trust takes advantage of the unlimited marital deduction.
This might seem unnecessary. After all, you could simply leave the money to your spouse, and that also would take advantage of the unlimited marital deduction. But let’s say you were married before and you want to ensure that your wealth eventually ends up in the hands of your children from your earlier marriage or marriages. By using a QTIP trust, you can make sure that whatever assets remain in the trust after your spouse’s death will go to your kids.
Unlike the money in a bypass trust, there may be federal estate taxes owed on the money in a QTIP trust.
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