Do QTIP trusts get a step up in basis?

A QTIP is a special form of marital trust under which the surviving spouse must be paid all of the net income of the QTIP each year. There can be no other beneficiary besides the surviving spouse during the spouse’s lifetime. The assets payable to the QTIP will get a step up in basis.

Is QTIP property included in gross estate?

The QTIP trust pays an income to the surviving spouse who may also use some of the trust assets for their own benefit, but the trust assets are inherited by someone else of your choosing, like your child from a previous marriage. When the surviving spouse dies, the QTIP property is includable in their gross estate.

How is trust income distributed in a QTIP marital trust?

Under a QTIP, income is paid to a surviving spouse, while the balance of the funds is held in trust until that spouse’s death, at which point it is then paid out to the beneficiaries specified by the grantor.

Can cost basis be stepped up in a trust?

Do assets owned in a trust receive a step-up in basis? Yes and no. If the asset was held in a revocable (or living) trust before the owner died, it will likely be eligible for a step-up in cost basis. Financial accounts aren’t the only assets that can be held in trust.

Do you get a step up in basis when a spouse dies?

When one spouse dies, the surviving spouse receives a step-up in cost basis on the asset. In other words, an inherited asset gets stepped up twice in a community property state: once for the surviving spouse and a second time for the ultimate beneficiary.

Can surviving spouse be trustee of QTIP trust?

You can name your spouse to be the trustee, choose one of your adult children, or pick a disinterested third party. Professionals will serve as trustees for a fee (usually a percentage of the value of trust assets), but only if the value of the trust assets is large enough.

What are the benefits of a QTIP trust?

The QTIP trust serves like a “crystal ball” for the uncertainty of the future in marital trust planning. Not only does it provide for your surviving spouse and other loved ones after your death, but it also offers flexibility to your Executor in maximizing your federal estate tax savings.