QTIP Trust Attorney in Austin, TX

QTIP Trusts for Austin Families

A QTIP trust (qualified terminable interest property trust) is the most widely used marital trust. It gives the surviving spouse all of the income for life, qualifies for the estate tax marital deduction, and still lets the first spouse decide who receives the property after the survivor’s death. That combination makes it a standard tool for second marriages, blended families and larger estates.

Reviewed by Turner Henington, attorney and former KPMG tax accountant, Texas Bar No. 24148206 · Updated November 2026

QTIP Trust Requirements

• All income to the spouse for life, payable at least annually (26 U.S.C. § 2056(b)(7)).
• No one else can benefit during the spouse’s life. Nobody, including the spouse, can have the power to appoint the property to anyone other than the spouse while the spouse is alive.
• The executor makes the QTIP election on the deceased spouse’s federal estate tax return, Form 706. The election can be made for all of the trust or a fraction of it.

The trust can also allow principal distributions to the spouse, for example for health and support, and the survivor can generally require the trustee to make unproductive property, such as raw land, produce a reasonable income.

Why Families Use QTIP Trusts

• Blended families. The survivor is taken care of for life, and the first spouse’s children receive what remains. See estate planning for blended families.
• Remarriage protection. A new spouse can’t redirect the property.
• Tax deferral. No estate tax at the first death on the elected property.
• A new basis at the second death. QTIP property is included in the survivor’s estate, so it generally receives a step-up in basis when the survivor dies (§ 1014(b)(10)).
• Decide after the death. The executor chooses how much to elect, and any portion not elected can pass to a bypass trust, the “Clayton QTIP” design.

What Happens When the Surviving Spouse Dies

The QTIP property is included in the survivor’s taxable estate (26 U.S.C. § 2044), where the survivor’s own exemption, and any unused exemption from the first spouse through portability, can shelter it. If estate tax is owed because of the QTIP property, the survivor’s estate generally has the right to recover that tax from the QTIP trust rather than from the survivor’s other heirs (§ 2207A). The property then passes to the remainder beneficiaries named by the first spouse.

A surviving spouse who gives away any part of their income interest during life is treated as transferring the entire QTIP property for gift tax purposes (§ 2519), so changes after the first death need careful advice.

QTIP Trusts and the Generation-Skipping Tax

Because the QTIP election makes the survivor the “transferor” for generation-skipping tax purposes, the first spouse’s GST exemption can be wasted unless the executor also makes a reverse QTIP election. That matters for families planning trusts for grandchildren.

How We Help

We draft QTIP trusts in wills and revocable living trusts, and after a death we help the executor and CPA decide how much to elect on Form 706, how to divide the trust into exempt and non-exempt shares, and how the election fits with portability.

Why Work With Us

• Tax background. Turner Henington is a former KPMG tax accountant, so we design trusts with both the estate tax and your family’s income tax in mind.
• We work with your CPA and advisor. Marital and bypass trust decisions often happen after a death, on the estate tax return, so we coordinate with the people who prepare it.
• Flat-fee quotes. After a free consultation, you get a written flat-fee quote before any work starts.
• We also handle the first death. Funding these trusts and making the elections is part of settling the estate, and we handle both the planning and the administration.

Talk to an Estate Tax Planning Attorney

Call (512) 737-8404, book a free consultation, or send us a message below.

What Our Clients Say

QTIP Trust FAQ

What does QTIP stand for?

Qualified terminable interest property. The surviving spouse’s interest “terminates” at their death, but the property still qualifies for the marital deduction if the executor elects.

Is a QTIP election automatic?

No. The executor must elect QTIP treatment on the deceased spouse’s federal estate tax return (Form 706). The election can cover all or part of the trust.

Can the surviving spouse receive principal from a QTIP trust?

Yes, if the trust allows it. The survivor must receive all income at least annually, and the trust can also allow principal distributions, for example for health and support.

Who pays the estate tax on QTIP property when the survivor dies?

The property is included in the survivor’s estate, and the survivor’s estate generally can recover the estate tax caused by the QTIP property from the QTIP trust itself.

Does QTIP property get a step-up in basis at the second death?

Generally yes, because it is included in the surviving spouse’s estate.

Other Estate Tax Planning Tools

• Estate tax planning in Austin: overview
• Bypass (credit shelter) trust
• Marital trust
• Reverse QTIP election
• Portability: keeping a deceased spouse’s unused exemption
• The Texas community property double step-up
• Lifetime gifting in Texas

Sources

• 26 U.S.C. § 2056(b)(7) (QTIP marital deduction)
• 26 U.S.C. § 2044 (inclusion in the survivor’s estate)
• 26 U.S.C. § 2207A (recovery of tax on QTIP property)
• 26 U.S.C. § 2519 (disposition of the income interest)
• IRS: About Form 706
• Estate of Clayton v. Commissioner, 976 F.2d 1486 (5th Cir. 1992)

This page is general information, not tax or legal advice for your situation. Reading it does not create an attorney-client relationship.