One type of marital trust is a Qualified Terminable Interest Property Trust, named a QTIP Trust. The QTIP provides the surviving spouse with income that the trust generates for the remainder of the spouse’s lifetime. There are rules governing the amount which funds this trust and the final distribution of the trust assets. When properly executed, the transfer is exempt from federal estate tax. A QTIP can be used to provide the surviving spouse with income for life. At the death of the surviving spouse, the entire value of the trust, including appreciation, is passed to the heirs of the original spouse, federal estate tax-free. Upon death, the estate tax applicable exclusion amount of the surviving spouse is applied to the value of his or her estate, which does not include the assets in the trust. This maximizes tax by using the applicable exclusion amounts of both spouses.

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