A marriage brings together two lives, often with children, property, and commitments that began long before the wedding. A well-designed estate plan can honor all of those relationships. A qualified terminable interest property trust, usually called a QTIP trust, can provide for your spouse throughout life while preserving your instructions about who receives the remaining property afterward.

That combination can be especially helpful in a blended family. It can also suit a couple who simply wants continuing management, dependable support, and a thoughtful plan for the next generation. Spiro Verras helps families consider how a QTIP would work alongside their other assets, their tax planning, and the way they want their loved ones to live.

Key takeaways

  • Your spouse receives the trust’s income for life, with principal available if the trust permits it.
  • You establish who receives the remaining property after your spouse’s death.
  • A qualifying trust and the required tax election can allow a marital deduction, generally deferring estate tax until your spouse’s death.
  • The funding decision should consider income, liquidity, capital gains, and the family’s needs.
  • A QTIP and a bypass trust solve related questions in different ways. Some estate plans use both.

How it works | Choosing assets | Tax reporting | Common questions

Providing for two generations

In a common arrangement, your estate plan directs property into a QTIP trust at your death. Your spouse is entitled to all trust accounting income, paid at least annually. During your spouse’s life, the trust cannot permit distributions of that property to someone else. Your instructions determine who receives what remains when your spouse dies, subject to any carefully limited power you choose to give your spouse to adjust those later shares.

The trust may also authorize principal distributions for your spouse. This is a personal planning decision: We consider the lifestyle you share, other resources, health needs, and how much flexibility the trustee should have. Income means income determined under the trust’s accounting rules. It does not automatically include every dollar received from selling an investment.

The federal requirements appear in Internal Revenue Code section 2056(b)(7). The executor must make the appropriate QTIP election. A document bearing the name alone does not complete the tax planning.

A family example

Hypothetical example: A married business owner has adult children from an earlier marriage. The owner wants the surviving spouse to have reliable support and wants the remaining inheritance eventually to pass to those children. A QTIP can give the spouse income and access to principal under agreed standards, with the remainder held for the children afterward.

The quality of that plan depends on its details. A thoughtful trustee, clear distribution provisions, and a practical investment policy can help the spouse and children understand their respective interests. A conversation about expectations is often as valuable as the tax calculation.

Which assets belong in the trust?

A QTIP should have assets that can support its income obligations and the spouse’s likely needs. Investment accounts may offer flexibility. Real estate or a business interest may also fit, but we examine cash flow, management, valuation, and the ability to raise money when needed. A valuable asset that produces little income calls for particular attention to the spouse’s rights and the trustee’s options.

For a trust funded at death, qualifying assets generally receive a basis adjustment under the rules for inherited property. Basis is the tax starting point used to calculate gain on a later sale. Appreciated securities therefore deserve a different analysis here than they would in a lifetime gift to a trust excluded from your estate.

QTIP property included in the surviving spouse’s estate generally receives another basis adjustment at that spouse’s death. It can be an adjustment downward as well as upward. Retirement benefits and other income in respect of a decedent have separate rules. The relevant provisions are section 2044 and section 1014.

We also consider how the estate or revocable trust will satisfy the funding formula. Selling property, or using appreciated property to satisfy certain fixed-dollar obligations, can have income-tax consequences. Selecting the assets and completing the transfers are part of the planning.

What taxes and returns should we expect?

A QTIP established after a death ordinarily becomes a separate income-tax taxpayer with its own tax identification number. The trustee generally files Form 1041 when the filing requirements apply. Taxable income carried out to the spouse is reported to the spouse on Schedule K-1; income retained by the trust may be taxed to the trust. A principal distribution is not automatically tax-free merely because the trust labels it principal.

The estate-tax election is a different matter. The QTIP election ordinarily appears on the deceased spouse’s Form 706. A lifetime QTIP uses different gift-tax procedures. Spiro coordinates the legal structure with your CPA so that the documents, funding, and returns reflect the same plan.

For 2026, the federal basic estate and gift tax exclusion is $15 million per person. Prior taxable gifts and other facts affect the amount available. The IRS estate-tax guidance also explains portability, which may preserve a deceased spouse’s unused exclusion through an estate-tax return. State estate taxes require a separate review when another state is involved.

Family protection and trustee choice

A QTIP can provide continuity in how family wealth is managed and passed on. Its principal can also receive protection through appropriate spendthrift and distribution provisions. The scope of creditor protection depends on the beneficiary’s rights and the governing law. Required income payments, discretionary principal, and money already distributed must be evaluated separately.

Florida recognizes spendthrift protection and specific exceptions, including certain support claims. The planning should explain those distinctions rather than promise that every asset is beyond every creditor. The trustee also needs to balance the spouse’s current interests with the interests of the eventual beneficiaries.

A spouse may be able to serve as trustee with suitable limits. An independent trustee or co-trustee can be useful where distribution decisions, business assets, or family relationships would benefit from another person’s judgment. We discuss both capability and comfort: Who will your family trust to handle the responsibility well?

Common questions about QTIP trusts

Can my spouse use principal?

Yes, if the trust permits it. The document can set standards and identify who makes those decisions. The goal is to give the spouse appropriate support while making the expectations for the remaining inheritance clear.

What happens if my spouse remarries?

A QTIP’s qualifying income interest continues for the spouse’s lifetime. A provision that ends that right on remarriage can defeat the intended marital-deduction treatment. We can address your concerns about the eventual inheritance through the remainder provisions and other coordinated planning.

Is a QTIP the same as a bypass trust?

No. A QTIP ordinarily uses the marital deduction and includes its remaining property in the surviving spouse’s estate. A bypass or credit shelter trust generally uses the first spouse’s available exclusion and is designed to remain outside the survivor’s estate. The income-tax consequences and access provisions also deserve comparison.

Can we establish one during our lifetimes?

Yes. A lifetime QTIP can be useful in particular circumstances, but the gift-tax election, basis consequences, and later interests require their own analysis. The discussion above primarily describes a trust funded at death.

What if my spouse is not a U.S. citizen?

Citizenship can change the marital-deduction rules. A qualified domestic trust, or QDOT, and other planning may be needed. We address that early when coordinating a plan for a family with international connections.

A plan that respects your relationships

The starting point is a conversation about the people you want to support and the future you hope to make possible. Spiro can help you compare a QTIP, a bypass trust, outright gifts, and other arrangements in the context of your whole estate plan.

Contact Verras Law to arrange an appointment in Palm Harbor, in Tampa or St. Petersburg by appointment, or by Zoom or teleconference.

Sources and further reading