Lifetime Qualified Terminable Interest Property Trust
A lifetime qualified terminable interest property (QTIP) trust is an irrevocable trust created by one spouse (who usually has more money and property) for the benefit of the beneficiary spouse. The spouse can create and fund the trust without using any gift tax exemption by relying on the unlimited marital deduction, which allows spouses to gift money and property to each other without tax consequences. During the beneficiary spouse’s lifetime, they will receive all of the trust income and may be entitled to receive trust principal for limited purposes. When the beneficiary spouse dies, the remaining accounts and property will be included in their estate, thereby making use of the beneficiary spouse’s otherwise unused federal estate tax exemption. If the beneficiary spouse dies first, the remaining trust property can continue in the asset protection lifetime trust for the trustmaker spouse’s benefit (subject to applicable state law), and the remainder will be excluded from the trustmaker spouse’s estate when they die.