Question

Which of the following are nontax characteristics of a qualified terminable interest property (QTIP) trust?

I. The income may go to multiple beneficiaries.
II. The donor or decedent's executor qualifies the trust assets for the marital deduction by making a timely election
III. The principal of the trust is paid to the surviving spouse's estate if the election to qualify the assets for the marital deduction was not made upon creation of the trust.
IV. The grantor of the trust determines who receives the remainder interest in the trust assets.
A) I and III
B) II, III, and IV
C) II and IV
D) IV only

Answer 1

The nontax characteristics of a QTIP trust are: I and II.

Step-by-step explanation:

The nontax characteristics of a Qualified Terminable Interest Property (QTIP) trust can be determined by analyzing the given options.

Option I states that the income of the trust may go to multiple beneficiaries. This is correct as a QTIP trust allows for the income to be distributed to multiple beneficiaries.

Option II states that the trust assets qualify for the marital deduction if a timely election is made by the donor or decedent's executor. This is also a correct characteristic of a QTIP trust.

Option III states that if the election to qualify the assets for the marital deduction was not made upon creation of the trust, the principal of the trust is paid to the surviving spouse's estate. This is incorrect. In a QTIP trust, the principal remains in the trust and is not paid to the surviving spouse's estate.

Option IV states that the grantor of the trust determines who receives the remainder interest in the trust assets. This is also an incorrect characteristic. In a QTIP trust, the remainder interest is typically determined by the donor or decedent, not the grantor.