A trust for your spouse, if you’re married, can provide reliable financial support if he or she survives you. With a trust, professional investment management is built right in, an important consideration if the beneficiary lacks investment expertise.
Traditional Marital Trust
To qualify for the federal estate tax marital deduction, a trust must pay all of its income to the surviving spouse at least annually. With the traditional marital deduction trust, the spouse also has the power to alter the ultimate disposition of trust assets, typically through specific instructions provided in his or her will.
Qualified Terminable Interest Property Trust (QTIP trust)
The spousal power to direct the trust assets isn’t mandatory for the marital deduction. For example, in a second marriage situation, a QTIP trust might pay its income to the surviving spouse for life and its principal to children from the first marriage at the spouse’s death.
Qualified Domestic Trust (QDOT)
When the surviving spouse is not a U.S. citizen, this special form of trust must be used to secure the marital deduction. A QDOT pays all its income to the surviving spouse, and may in certain circumstances be subject to U.S. transfer taxes before the death of the surviving spouse.