Few types of trusts are as deep in the legal weeds as the qualified terminable interest property trust. A QTIP is a complex legal instrument that achieves a handful of highly specific goals. You should know these three things about when to use a QTIP trust.

Surviving Spouse

Foremost, the QTIP model is built around the idea of transferring a significant portion of your assets to a surviving spouse. Rather than giving total legal control of the assets to the surviving spouse, though, a QTIP maintains control of the assets in the trust. It then has further instructions regarding the assets' disposition after the spouse dies. Generally, following the passing of the surviving spouse, the trust transfers assets to traditional beneficiaries like the grantor's children or favorite charitable organizations.

Delaying Estate Taxes

The first question most folks ask a trust attorney usually is, "Why would anybody bother with all of this legal effort?" One of the strongest arguments is to avoid incurring the estate tax upon the transfer of the assets to the surviving spouse. American law allows an unlimited marital deduction, effectively leaving a surviving spouse off the hook for any estate taxes.

However, you should note this doesn't permanently cancel the estate tax obligations. Instead, it bumps them to the next set of beneficiaries. After the surviving spouse passes, the beneficiaries of the trust will have to pay taxes on their portions of the assets.

Also, be aware this doesn't eliminate other obligations. Your estate does still have to settle your outstanding debts and tax bills. Creditors and tax agencies may pursue litigation against the trust if they see it as dodging those bills so make sure to fund the settlement of those obligations.

Ensuring Transfer

Another argument in favor of the QTIP trust is that it guarantees the eventual transfer of the assets to the other beneficiaries. Although the spouse gets the benefits of the assets during their lifetime, they have no say in what happens afterward. If you're concerned that your spouse might not transfer the assets from their estate to one of your kids, for example, a trust attorney might recommend setting up a QTIP.

People sometimes use this sort of trust as a prophylactic in complex family situations. If you remarried and your kids are concerned about your new partner taking financial advantage of the situation, a QTIP trust is a good way to assuage those fears.   

For more info, contact a local trust attorney.