QTIP Trust: What Surviving Spouses Need to Know

If your spouse's estate plan included a QTIP trust, you're entitled to income from it for the rest of your life — but you cannot touch the principal, and you have no say over who inherits it when you die. That's not a mistake. It's how QTIP trusts are designed to work. Here's what it means for your financial life going forward.

What is a QTIP trust?

A Qualified Terminable Interest Property (QTIP) trust is a specific type of marital trust that qualifies for the federal estate tax marital deduction under IRC §2056(b)(7).¹ When assets pass into a QTIP trust at the first spouse's death, no estate tax is owed on them immediately — they're deducted from the deceased spouse's taxable estate. In exchange, the trust must follow strict rules: you receive all the income for life, you generally cannot touch the principal, and the assets are included in your own taxable estate when you die.

QTIP trusts are most commonly used in two situations:

• Second marriages: the deceased spouse wanted to provide you with income for life while ensuring that the assets ultimately pass to children from the first marriage, not to a future spouse you might remarry.
• Estate tax planning for larger estates: estates above the federal exemption ($15,000,000 in 2026) may use a QTIP to defer estate tax until the second death, spreading the tax hit across two estates.

Who makes the QTIP election — and when

You don't make the QTIP election. The executor of your spouse's estate does — and the decision is made on the estate tax return (Form 706), which must be filed within 9 months of your spouse's death (with a 6-month extension available).²

The QTIP election is irrevocable once made. Once the executor elects to treat trust assets as QTIP property and claims the marital deduction, the rules are locked in for the life of the trust and beyond. The executor can elect QTIP on all or part of the marital trust assets — partial elections are permitted and sometimes used strategically.

If the executor is a third party (a bank, an adult child, or a professional), you should understand what they elected before making financial plans. Ask for a copy of the filed Form 706, specifically Schedule M, which lists the QTIP assets. This document determines how much of the trust is subject to QTIP rules.

Your income rights as surviving spouse

The law requires that you — and only you — receive all the income generated by the QTIP trust assets, paid at least annually.¹ "All income" means trust accounting income: dividends, interest, rents, and similar cash flow. Capital gains are usually not trust accounting income and may or may not be distributed depending on how the trust is invested and how it is administered under state law.

You also have the right to demand that trust assets be invested productively. If the trustee is holding unproductive assets (vacant land, cash sitting in a 0% account) and not generating income, you can legally compel the trustee to make the trust productive — or to convert non-income-producing assets to income-producing ones. This power is called the right to compel productivity and it is implicit in the QTIP income requirement.

Frequency of distributions

The trust must distribute income to you at least annually. Many trustees distribute quarterly or even monthly for practical convenience. If your trustee is distributing less frequently than annually, that's a problem — consult an estate attorney.

What income looks like in practice

If the QTIP trust holds $2,000,000 in a balanced portfolio generating 3% income yield, you'd receive approximately $60,000 per year. Capital gains from portfolio sales may or may not be distributed — the trust document and state law control this. If capital gains are retained inside the trust, they're taxed at compressed trust rates (see below).

Your relationship with the principal

By default, you cannot access the trust principal. The assets belong to the trust, which ultimately passes them to whoever your spouse named as the remainder beneficiaries — typically children or grandchildren from a prior relationship.

However, many QTIP trusts include a principal invasion provision that allows the trustee to distribute principal to you for specific needs. The most common standard is HEMS — Health, Education, Maintenance, and Support. Under HEMS, the trustee has discretion to invade principal to maintain your standard of living, pay medical bills, fund education, or support you if income is insufficient. HEMS distributions are not automatic; you typically must request them and the trustee decides.

Some trusts also include a "5 and 5" power — the right to withdraw the greater of $5,000 or 5% of the trust's fair market value each year, without any need to justify the withdrawal. This is a limited power that doesn't disqualify the QTIP election. If your trust has a 5-and-5 power, check the trust document to confirm whether it accumulates (unused years carry over) or lapses annually (use it or lose it).

Tax implications while the trust is active

Income tax: yours, not the trust's

When the trust distributes income to you, that income is deductible by the trust and taxable on your personal income tax return — the same as ordinary income you earned yourself. You do not pay tax at the compressed trust tax rates on distributed income. Trusts hit the 37% federal bracket at just $16,000 of retained income in 2026,³ so it is almost always better — from a tax standpoint — for the trust to distribute income to you rather than retaining it.

If the trustee retains any income inside the trust (capital gains, for example), the trust pays tax on it at those compressed rates. You should ask your trustee or CPA what the trust's distribution policy is and what income is being retained each year.

IRMAA: the Medicare surcharge risk

QTIP trust income is reported on your personal tax return and adds to your Modified Adjusted Gross Income (MAGI). If that income — combined with your Social Security benefits, RMDs, and other investment income — pushes your MAGI above $109,000 as a single filer, you will owe Medicare Part B IRMAA surcharges.⁴ The 2026 Part B base premium is $202.90 per month; at the first surcharge tier, it rises to $284.10 per month — an additional $972 per year, per person.

If your spouse died recently and Medicare is still using your old joint-filing income (which was under the $218,000 joint threshold), this may not be an immediate issue. But once Medicare's two-year lookback window shifts to your first full year filing as a single person, the trust income combined with your other income can push you over the $109,000 single-filer IRMAA threshold. An SSA-44 appeal can help if your income dropped materially due to widowhood — see IRMAA Appeal After Your Spouse Dies for the process.

Social Security taxation

Trust income from the QTIP also increases your provisional income for purposes of determining how much of your Social Security survivor benefit is taxable. For single filers, up to 85% of Social Security is taxable once provisional income exceeds $34,000. QTIP trust distributions count toward this threshold. See Social Security Survivor Benefits: How Much Is Taxable?

What happens when you die

QTIP assets are included in your taxable estate

When you die, the full fair market value of the QTIP trust assets is included in your gross estate under IRC §2044 — even though you never owned the assets outright and had no control over who inherits them.⁵ This is the IRS collecting the estate tax that was deferred when your spouse died: the marital deduction deferred the tax, §2044 ensures it is eventually paid.

In practical terms, this means:

• The QTIP trust assets are counted against your federal estate tax exemption ($15,000,000 in 2026).
• If the combined value of your own assets plus the QTIP trust exceeds $15,000,000, your estate will owe estate tax.
• If the value stays under $15,000,000, no estate tax is owed — but the QTIP assets still go to the remainder beneficiaries your spouse named, not through your own estate plan.

Heirs receive a step-up in basis

Because the QTIP trust assets are included in your gross estate at death, the trust assets receive a fresh step-up in cost basis to their fair market value on the date of your death.⁶ This is a significant benefit for the remainder beneficiaries: any capital gains that accrued inside the QTIP trust during your lifetime are effectively wiped out at the second death. If the trust was invested in appreciated stock, the beneficiaries inherit it at the current market value with no embedded capital gains tax.

Where the assets go

You cannot change who receives the QTIP trust assets at your death. That was locked in when your spouse created the trust. If you're concerned that the distribution plan no longer reflects the family's circumstances — perhaps a named beneficiary has died, or family dynamics have changed — the only option is to consult an estate attorney about whether the trust has any modification mechanisms (a trust protector, decanting provisions, or a state non-judicial modification process). These vary significantly by state and by trust document.

QTIP vs. portability: the executor's strategic choice

When your spouse died, the executor had two tools available to reduce estate tax: the QTIP election and the portability election. They are not mutually exclusive — both can be used together — but the interaction matters for your financial plan.

• Portability transfers your spouse's unused estate tax exemption to you. If your spouse's estate was under $15,000,000 (as most are), there was unused exemption. A portability election on Form 706 preserves it as a "Deceased Spouse's Unused Exclusion" (DSUE) that adds to your own exemption.⁷ A widow with a $15M exemption plus a $12M DSUE effectively has $27M in estate tax shelter — more than enough for most estates.
• QTIP election defers estate tax on marital trust assets to the second death. If the QTIP trust assets are large enough to potentially trigger estate tax at the second death, the DSUE from portability helps absorb them.

The key point: if the executor did NOT file Form 706 and elect portability, that opportunity is subject to a 5-year late-filing window under Rev. Proc. 2022-32 for estates that weren't otherwise required to file (estate under $15M).⁸ If you are approaching that window — or if you're unsure whether portability was elected — consult an estate attorney now. A missed DSUE could cost your heirs millions in estate taxes at your death.

Common problems surviving spouses encounter

• Trustee conflicts. If the trustee is a stepchild or a remainder beneficiary, their financial interests are opposite to yours: they benefit from keeping trust assets invested for growth (which benefits their inheritance), while you benefit from current income. This structural conflict doesn't make the trustee dishonest, but it does create friction. Document all trustee communications, and have an estate attorney review the trust's investment policy annually if you sense the trustee is prioritizing growth over your income rights.
• Unproductive trust assets. If the trust holds real estate, a family business, or other non-income-producing assets, you may not be receiving the income you're legally entitled to. Your right to compel productivity is a real legal right — exercise it if the trust is not generating reasonable income.
• Surprised by §2044 inclusion. Many widows don't realize the QTIP trust will be counted in their taxable estate at death. If your own estate plus the QTIP trust could approach $15M, your estate attorney and financial planner should model the eventual estate tax exposure and discuss strategies (gifting, charitable giving, life insurance trusts) during your lifetime.
• IRMAA creep. As the trust's assets grow over time and generate more income, the distributions to you increase — potentially pushing your MAGI above the $109,000 IRMAA threshold in years when your income was previously below it. Annual income planning should account for QTIP distributions.
• Remarriage complications. Most QTIP trusts contain a provision that terminates or modifies your income rights if you remarry. Read your trust document carefully before making any remarriage decisions — the financial implications can be significant. See also Remarriage Financial Planning for Widows.

Questions to ask your trustee and advisors

1. What assets are in the QTIP trust, and what income did they generate last year?
2. What is the trust's investment policy — income-focused, growth-focused, or balanced?
3. Was a QTIP election made, and was it partial or full? Where is the filed Form 706?
4. Was portability elected? What is the DSUE amount?
5. Does the trust allow principal invasion for HEMS? Has any principal been distributed?
6. Who are the remainder beneficiaries, and what is the current fair market value of trust assets?
7. What is the trust's annual income — and what portion, if any, is being retained inside the trust?

WidowAdvisorMatch is a referral service, not a licensed advisory firm. We may receive compensation from professionals in our network. Content is for informational purposes only and does not constitute financial, tax, or investment advice.