Which statement about a QTIP election is true?

Which statement about a QTIP election is true?

• A. It is optional and used to qualify the trust for the marital deduction
• B. It has no impact on estate taxes
• C. It is required for all QTIP trusts
• D. It automatically makes the trust qualify for the marital deduction

Answer: (B)

The key idea is that a QTIP election is about enabling a trust property to qualify for the unlimited marital deduction. It is an optional election made on the first-death estate tax return that you use when you want the surviving spouse to receive income from the trust for life while preserving the remaining trust assets for other beneficiaries after the surviving spouse dies. By electing QTIP, the property can pass free of estate tax at the first death, because it is treated as qualifying for the marital deduction. Without making the election, that property might not qualify for the marital deduction, and could be included in the deceased spouse’s estate for tax purposes, resulting in higher estate taxes at the first death. The election is not automatically applied to all QTIP trusts; it is chosen when the grantor wants the tax benefits of the marital deduction to apply to that property.

The key idea is that a QTIP election is about enabling a trust property to qualify for the unlimited marital deduction. It is an optional election made on the first-death estate tax return that you use when you want the surviving spouse to receive income from the trust for life while preserving the remaining trust assets for other beneficiaries after the surviving spouse dies. By electing QTIP, the property can pass free of estate tax at the first death, because it is treated as qualifying for the marital deduction. Without making the election, that property might not qualify for the marital deduction, and could be included in the deceased spouse’s estate for tax purposes, resulting in higher estate taxes at the first death. The election is not automatically applied to all QTIP trusts; it is chosen when the grantor wants the tax benefits of the marital deduction to apply to that property.