Retirement & Financial Planning Report

Married couples–especially remarried couples–might consider a qualified terminable interest property (QTIP) trust in their estate planning. Suppose, for example, Walt Benson has a $6 million estate. He might leave $3.5 million to his children from a first marriage. The federal estate tax exemption is scheduled to reach $3.5 million in 2009, so this bequest should avoid estate tax.


Walt might leave his remaining $2.5 million to a QTIP trust for his second wife Ann, who will be entitled to all of the income from this trust, as long as she lives. Walt can give the trustee discretion to distribute other trust assets to Ann, for unexpected expenses. No one else can receive distributions from this trust during Ann’s lifetime.

At Ann’s death, the assets in the QTIP trust will go to beneficiaries named by Walt, so he can name his children. With this plan, the $2.5 million that Walt leaves to the QTIP trust won’t be subject to estate tax at his death. Any assets remaining in the QTIP trust may be subject to estate tax at Ann’s death, along with Ann’s other assets. Thus, a QTIP trust can offer estate tax deferral as well as the ability to divide an inheritance between your spouse and other heirs.