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 Massachusetts, a Qualified Terminable Interest Property (QTIP) trust is a type of irrevocable trust used in estate planning to provide for a surviving spouse while maintaining control over the distribution of trust assets after the surviving spouse's death. The grantor creates the QTIP trust, funding it with assets that will generate income for the surviving spouse. The trust is structured so that the surviving spouse receives income payments for life, with the principal preserved for eventual distribution to the grantor's chosen beneficiaries, which could be children from a previous marriage. The QTIP trust is also a tool for minimizing estate taxes. Upon the grantor's death, the executor of the estate makes a QTIP election on the estate tax return to treat the trust assets as qualifying for marital deduction, deferring estate taxes until the surviving spouse's death. This allows the assets to pass to the surviving spouse without immediate estate tax consequences, with taxes being assessed upon the second spouse's death when the assets are distributed to the final beneficiaries.