What is a qualified terminable interest property trust?
A qualified terminable interest property (QTIP) trust is a type of trust that is created under California inheritance law. This type of trust is used to give a surviving spouse the right to receive income from the trust during their lifetime, while also providing that the assets remaining in the trust will eventually pass to other beneficiaries. The trust must meet certain requirements in order to be considered a QTIP trust. First, the trust must be created during the lifetime of the grantor, or the person creating the trust. Additionally, the trust must be irrevocable, meaning that once the trust is set up, it cannot be changed. The trust must also designate the surviving spouse as the income beneficiary, and must provide that any assets left in the trust after the death of the surviving spouse will pass to other beneficiaries. In addition, the assets in the trust must be “qualified” under the Internal Revenue Service rules. This means that the assets must be held in the trust for a certain amount of time, and must pass to the other beneficiaries at the death of the surviving spouse. The advantages of a QTIP trust are that it provides for the surviving spouse without cutting out any other beneficiaries, and it does so in accordance with both California inheritance law and the IRS rules. It also allows for tax savings for the grantor, since the trust is a way to transfer assets to the next generation without triggering estate taxes. This type of trust is an important tool for anyone who is looking to plan for the future of their assets.
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