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February 16, 2009

Qualified Terminable Interest Property (QTIP)

Your Guide

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Definition

Property that passes from the decedent, in which the surviving spouse has a qualifying income interest for life, and to which an election applies; the surviving spouse has a qualifying income interest for life if (I) the surviving spouse is entitled to all the income from the property, payable annually or at more frequent intervals, or has a usufruct interest for life in the property, and (II) no person has a power to appoint any part of the property to any person other than the surviving spouse.

QTIP, for purposes of § 2056(a), is treated as passing to the surviving spouse and no part of the property shall be treated as passing to any person other than the surviving spouse.

Referring Cite

IRC § 2056, State law

Additional Helpful Information

  • If a QTIP trust is designed properly, it may qualify for the marital deduction
  • An executor may elect under IRC § 2056(b)(7) to treat an IRA and a trust as QTIP when the trustee of the trust is the named beneficiary of the decedent’s IRA, the surviving spouse can compel the trustee to withdraw from the IRA an amount equal to all the income earned on the IRA assets at least annually and to distribute that amount to the spouse, and no person has a power to appoint any part of the trust property to any person other than the spouse.

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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