QTIP Trusts: Requirements & Tax Benefits for Married Couples

A QTIP trust is set up to transfer a bulk of a grantor's estate without paying transfer taxes. These trusts have certain requirements.

QTIP Trust Requirements

First, for the trust to be recognized and treated as a QTIP trust the grantor must be a U.S. citizen. He or she must be married as well, and the couple must qualify for the marital deduction rule. The marital deduction rule allows for deferrence of estate taxes, to death taxes on outright transfers of wealth and estate assets between spouses. After the grantor dies the surviving spouse must have authority on the assets transferred. Any assets that are not income producing should be disposed of for income producing investments.

The surviving spouse must also be receiving the trust income for life at least annually, which passes into his or her own gross estate. This is known as "stub income." Additionally, to be treated as a QTIP trust the executor must file for form 706 under the federal estate tax return requirements by the IRS. Check with a financial planner for further information and the IRS for more details on the 706 form and how to file it.