Summary of Marital Trusts

Question 1

QTIP Trust purpose

(aka C trust)

Answer 1

Marital trust that

1. Creates a terminable interest for spouse
2. but that does qualify for the unlimited marital deduction
3. and gives power to grantor to name remainderman

Question 2

QTIP Characteristics

Answer 2

• All income must be payable to surviving spouse at least annually for life
• Surviving spouse is usually not given POA
• QTIP election made on Form 706 by executor

Question 3

QTIP Planning opportunity

Answer 3

• Income to spouse for life
• Remainder to children

Question 4

QTIP Gift/Income Tax Consequences

Answer 4

• Included in the surviving spouse’s gross estate
• Trust pays its pro rata share of estate tax for surviving spouse
• Percentage not receiving the marital deduction for first spouse is like a B trust when surviving spouse dies

Question 5

Power of Appointment Purpose

(aka A trust)

Answer 5

1. Marital trust that creates a terminable interest for spouse
2. but that does qualify for the unlimited marital deduction
3. and gives surviving spouse general power to appoint remainderman

Question 6

POA Characteristics

Answer 6

1. All income must be payable to surviving spouse at least annually for life
2. Surviving spouse has general POA
3. No election required

Question 7

POA Planning Opportunity

Answer 7

• Income to spouse
• Spouse is given general POA over property exercisable during life or at death

Question 8

POA Gift/Income Tax Consequences

Answer 8

1. Included in the gross estate of the surviving spouse (as long as surviving spouse has not gifted or consumed trust corpus during life)
2. If surviving spouse gives the property away (exercises her unlimited POA during life), surviving spouse has made a taxable gift

Question 9

Bypass Trust Purpose

(aka B trust)

Answer 9

1. To take advantage of the applicable credit amount afforded first decedent spouse
2. Sometimes used to pass property to surviving spouse but can be used to give any beneficiary an income interest, with a different remainderman
3. Does not qualify for the marital deduction

Question 10

Bypass trust characteristics

Answer 10

1. Alternative to an outright transfer
2. Takes advantage of the applicable credit of decedent
3. Useful when a split investment exists between income and remainder

Question 11

Bypass trust planning opportunity

Answer 11

Instead of leaving an outright bequest to children,

• decedent spouse puts property into a bypass trust
• income to surviving spouse for life
• and remainder to children upon surviving spouse’s death

Question 12

Bypass trust Gift/Income Tax Consequences

Answer 12

• Assets included in first decedent spouse’s gross estate
• Bypasses surviving spouse’s gross estate