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 Mississippi, a Qualified Terminable Interest Property (QTIP) trust is a type of trust that allows a grantor to provide for a surviving spouse while maintaining control over how the trust's assets are distributed after the surviving spouse's death. This is particularly useful in situations such as second marriages with children from previous relationships. The trust is irrevocable, meaning it cannot be altered or revoked once established. A trustee, or multiple trustees, must be appointed to manage the trust's assets. The QTIP trust typically provides the surviving spouse with income generated from the trust's assets and preserves the principal for eventual distribution to the named beneficiaries after the surviving spouse's death. For tax purposes, the assets placed in a QTIP trust are not subject to estate tax upon the death of the grantor but will be included in the surviving spouse's estate for estate tax purposes when the surviving spouse dies. The executor of the grantor's estate must file an estate tax return and make a QTIP election to specify which assets are to be placed in the QTIP trust. It's important to note that while the concept of QTIP trusts is recognized at the federal level for estate tax purposes, the specific treatment of these trusts can vary by state law. Therefore, it is advisable for individuals in Mississippi to consult with an attorney who specializes in estate planning to ensure that a QTIP trust is properly established and administered in accordance with state and federal laws.