A Qualified Terminable Interest Property (QTIP) trust is a type of marital trust authorized under state law. It lets you leave assets in your trust to a surviving spouse while locking in other final beneficiaries. This is often children from a prior marriage. This ensures your spouse has income for life and perhaps limited access to the principal, but without permitting them to redirect the inheritance to anyone else.
At Filippi Law Firm, P.C., our California estate law attorneys help you with second marriage issues, community property rules, and so much more. We understand that a QTIP trust is often a great way to balance the interests of your current spouse and the long-term inheritance rights of your kids.
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How a QTIP Trust Works
When the first spouse dies:
- The executor files Form 706 and makes the QTIP election.
- The elected assets qualify for the federal marital deduction.
- The surviving spouse receives all trust income for life.
- Principal can be distributed only under the trust’s limited standards.
- When the surviving spouse dies, the remaining assets pass to the children or other beneficiaries chosen by the first spouse.
If the Form 706 election is missed, the assets do not qualify for the marital deduction, and the trust fails as a QTIP. This can trigger unnecessary estate tax exposure and eliminate the intended protections.
What the Surviving Spouse Can and Cannot Do
Allowed:
- Receive all income annually
- Use trust property (including the residence)
- Access principal only under the trust’s stated standard (often health, education, maintenance, support)
Not allowed:
- Change beneficiaries
- Give trust assets away
- Sell or encumber trust property for personal benefit
- Redirect the inheritance to a new spouse or stepchildren
This is the core blended‑family protection: your spouse is supported, but your children’s inheritance is locked in.
QTIP vs. Bypass Trust vs. Outright Gift
| Feature | QTIP Trust | Bypass Trust | Outright Gift to Spouse |
|---|---|---|---|
| Protects children from first marriage | Yes | Yes | No |
| Surviving spouse controls final beneficiaries | No | No | Yes |
| Requires Form 706 election | Yes | No | No |
| Estate tax treatment | Included in surviving spouse’s estate | Excluded from surviving spouse’s estate | Included in surviving spouse’s estate |
| Access for surviving spouse | Income + limited principal | Limited | Full ownership |
| Best for | Second marriages | Tax planning, asset protection | Simple estates, first marriages |
You can see our full bypass trust guide to learn even more about the tools you have available.
How the 2026 Federal Estate Tax Exemption Changes the Strategy
The 2026 federal estate tax exemption is $15 million per person ($30 million per married couple). High‑net‑worth California families now have far more room to use QTIP trusts without triggering estate tax at the first death.
But remember:
- QTIP assets are taxed at the surviving spouse’s death.
- A bypass trust shelters assets permanently.
- Many older A/B trust plans drafted under the $5M regime should be reviewed—some may unnecessarily deprive heirs of a step‑up in basis.
You can also see our 2026 exemption analysis to better understand how the exemption may apply to you.
California‑Specific Issues: Community Property and Prop 19
Community Property
In California, half of community property belongs to each spouse. A QTIP trust can hold the deceased spouse’s half, but the surviving spouse’s half must be handled separately. Proper characterization is essential to avoid accidental disinheritance or unintended tax consequences.
Prop 19 Reassessment
If the residence passes through a QTIP trust, Prop 19 reassessment may occur when the surviving spouse later dies and the property transfers to the children. Families expecting to keep a low property tax base must plan carefully, especially when the home is the largest asset.
A Worked Second‑Marriage Scenario (Real Numbers)
You have:
- $4.5M home in Granite Bay
- $3M in investments
- Two adult children from your first marriage
- A second spouse you want to support but not give control over the estate
You place $7M into a QTIP trust. Your spouse receives income (say $210,000/year at a 3% yield) and can live in the home for life. When they pass away, the remaining assets, perhaps $6.2M after growth and distributions, go directly to your children.
Your spouse is protected. Your children are protected. No one can rewrite your plan.
FAQ
1. What is a QTIP trust?
A marital trust that provides for your spouse while locking in your chosen beneficiaries.
2. Who should consider a QTIP trust?
Anyone in a second marriage who wants to support a spouse without risking disinheritance of children.
3. Does a QTIP trust avoid estate tax?
It defers tax until the surviving spouse’s death. The assets are included in their taxable estate.
4. What happens if the QTIP election is not made?
The trust fails as a QTIP, loses the marital deduction, and may trigger unnecessary estate tax.
5. Can the surviving spouse change the beneficiaries?
No. That is the defining feature of a QTIP trust.
6. How does a QTIP compare to a bypass trust?
A bypass trust shelters assets from estate tax; a QTIP does not. But a QTIP provides stronger spousal support.
Get Help with a QTIP Trust in California
Our team understands the complexities of different family arrangements and your desire to ensure they’re all protected. There are many tools to help with that, including QTIP trusts.
Let the dedicated estate planning attorneys at Filippi Law Firm, P.C. review your case. Contact us today for a consultation.
