A qualified terminable interest property (QTIP) trust is an estate planning tool that allows the person making the trust (the grantor or settlor) to leave assets for their surviving spouse and direct how the assets remaining in the trust will be distributed to named beneficiaries at the death of the surviving spouse. QTIP trusts are irrevocable (cannot be revoked). At least one trustee (person or entity) must be appointed by the trust to manage the assets of the trust.

A QTIP trust will usually provide regular payments to the surviving spouse—often from the income generated by the assets in the trust. QTIP trusts are often used when the grantor remarries and has children from a previous marriage. If the grantor dies before the grantor’s subsequent spouse dies, the QTIP trust will make income payments to the subsequent spouse and hold the principal assets that were placed in the trust until the surviving spouse dies—at which point the assets will be distributed to the trust beneficiaries.

At the death of the grantor, the executor of the grantor’s estate will file the estate’s tax return and make an election (the QTIP election) of which assets will be placed in the QTIP trust by listing them on a schedule to the estate’s tax return. The assets in a QTIP trust are not subject to estate tax at the grantor’s death but are subject to estate tax at the death of the grantor’s surviving spouse.

In Alaska, a Qualified Terminable Interest Property (QTIP) trust is a type of trust designed to provide financial support to a surviving spouse while preserving the assets for future beneficiaries, typically children from a prior marriage. The QTIP trust is irrevocable, meaning once it is established, the grantor cannot revoke it. The trust is managed by at least one trustee who oversees the assets and ensures that the surviving spouse receives regular payments, usually from the income the trust assets generate. Upon the death of the surviving spouse, the remaining assets are distributed to the beneficiaries as directed by the trust. For tax purposes, the assets placed in a QTIP trust are not subject to estate tax upon the death of the grantor. Instead, they become subject to estate tax upon the death of the surviving spouse. The executor of the grantor's estate must file an estate tax return and make a QTIP election to specify which assets are to be placed in the trust. This election allows the grantor to defer estate taxes and maintain control over the distribution of the trust assets after the death of the surviving spouse.