You want your husband or wife to be able to live on what you leave, for as long as they live. You also want what is left after that to reach your children. Your spouse may want the freedom to use the money as life changes. Your children may want to know that what you meant for them will reach them. Both are reasonable, and you care about both. They pull against each other, because a spouse who inherits everything outright decides where it goes next.
A QTIP trust is built for that. It supports your spouse for life and then passes what is left to the people you named. Neither side gets everything it wants. Your spouse receives the income but does not decide who inherits. Your children are named, but they wait. It works the same way in a first marriage, if you wonder what would happen if your spouse remarried. QTIP is short for qualified terminable interest property. The statute and the state's own example are in the detailed version below.
What is a QTIP trust?
A QTIP trust is a trust for your surviving spouse. It has two fixed rules. Your spouse is entitled to all of the trust's income for life, paid at least once a year. While your spouse is living, no one can give any of the trust's property to anyone else.1
When your spouse dies, what is left goes to the people your trust names. Your spouse cannot redirect it, unless you wrote that power into the trust. You may see this called a marital trust. A QTIP trust is one kind of marital trust.1
You have one hard decision to make now: how much say your spouse will have over the money after you are gone.
How does a QTIP trust work?
You have an estate attorney write the trust into your will or living trust. After your death, the person settling your estate decides whether to make the QTIP election on the estate tax return.1
With the election, the trust is treated as if it had passed to your spouse, so no estate tax is due on it at your death.1 When your spouse dies, the property in the trust is counted in your spouse's estate. Any estate tax is figured then, when your children inherit.2
Why does a QTIP trust matter in Illinois?
Illinois taxes estates over $4,000,000. The federal line in 2026 is $15,000,000 for each of you.36 The federal rules also let your surviving spouse use the part of your exclusion you did not use, if your estate elects it on a return.7 Illinois has no such rule. If everything you own passes to your spouse, your own $4,000,000 Illinois exclusion goes unused, and that can mean a larger Illinois tax at the second death and less for your children.3
Illinois does let your estate make a QTIP election of its own, separate from any federal one.4 If your documents are written for it, your estate may be able to elect QTIP for the part above $4,000,000 and leave $4,000,000 outside the election, where your Illinois exclusion can cover it.
In the state's own example, an estate of $13,610,000 with a surviving spouse and an Illinois QTIP election of $9,610,000 owes Illinois nothing at the first death.3 The $4,000,000 left outside the election is exactly the exclusion. The $9,610,000 is added back for Illinois when the surviving spouse dies.5
To see the two deaths side by side, use the married-couple view of our Illinois estate tax calculator.
What are the disadvantages of a QTIP trust?
A QTIP trust has four disadvantages.
First, your spouse must be entitled to all of the income, and while your spouse is living the trust can pay no one else.1 If one of your children needs help with a down payment while your spouse is living, that help has to come from your spouse's own money or from another part of your plan, not from this trust.
Second, the election is permanent. The person settling your estate makes it once, on the estate tax return, and cannot change it later.1
Third, the tax is put off, not removed, because the trust is counted in your spouse's estate.2
Fourth, in Illinois the election has to be made on a return filed on time. The return is due nine months after death, and an extension may be requested.34
You will not be there when the election is made. The person settling your estate makes it, against a deadline, in a hard year. You can have the trust written now, with your estate attorney, and tell that person it exists.
When does a QTIP trust cause family conflict?
For many couples a QTIP trust causes no trouble at all. Everyone understands the plan and agrees with it. In other marriages it causes real distress, and what we see behind it is mostly fear: a spouse afraid of depending on a trust, children afraid of being left out.
The arguments start over the house more often than over the investments: who lives in it, who pays for it, and who gets it. The choice of trustee causes more conflict than the trust itself. A spouse as trustee worries the children, and a child as trustee worries the spouse. A surviving spouse can take the trust as a sign of not being trusted, and a spouse who wants everything outright is often afraid of having to ask someone else for money. When your spouse is close in age to your children, the children may wait most of their own lives to inherit.
The couples who have the least trouble told the children about the plan while both parents were alive.
Does a QTIP trust fit your family?
Whether a QTIP trust fits your family depends on what you own, how it is titled, and how much your spouse will need. Whether the $4,000,000 left outside the election is taxed again at the second death depends on how the trust that holds it is written. Those are questions for your estate attorney, who drafts the trust, and for the attorney or CPA who prepares the return. Our Illinois estate tax guide covers who owes the tax, and the planning essay covers the other tools.
The couples who have the least trouble told the children about the plan while both parents were alive.
Where we fit in. We integrate tax considerations into your investment strategy and collaborate with estate attorneys and CPAs to ensure your plan is coordinated. We are not a law firm or accounting firm, so we do not provide legal or tax advice. Everything in this material is for educational purposes, based on primary sources. Before taking any action, please consult the appropriate professionals to apply these ideas to your situation.
A QTIP trust is built to look after two sets of people in order: first the person you married, then the children you named. It asks each of them to accept less than full control so that neither is left out. If you would like to talk through how it fits with the rest of your plan, we are glad to have that conversation.
The detailed versionThe rules and the Illinois electionFor CPAs, estate attorneys, and anyone who wants the statute: the federal requirements, the election, the separate Illinois election on Form 700, and the state's published example carried to the second death.Show
Federal basis
26 U.S.C. § 2056(a) allows a deduction for the value of any interest in property that passes from the decedent to the surviving spouse, to the extent it is included in the gross estate. Section 2056(b)(1) denies the deduction for a terminable interest: one that will end on the lapse of time or on an event, where an interest in the same property passes from the decedent to someone else who may enjoy it afterward. Section 2056(b)(7) is an exception. Qualified terminable interest property "shall be treated as passing to the surviving spouse," and no part of it is treated as passing to any other person.1
Requirements
- Source of the property
- "which passes from the decedent"
- Income interest
- "the surviving spouse is entitled to all the income from the property, payable annually or at more frequent intervals"
- No diversion during life
- "no person has a power to appoint any part of the property to any person other than the surviving spouse"
- Partial elections
- "A specific portion of property shall be treated as separate property."
- Election
- "shall be made by the executor on the return of tax imposed by section 2001. Such an election, once made, shall be irrevocable."
Section 2056(b)(5) is the other common route to the deduction for a trust: a life estate with a general power of appointment in the surviving spouse. Under (b)(7) the surviving spouse needs no such power. During the spouse's life no person may hold a power to appoint the property to anyone else; a power exercisable only at or after the spouse's death is permitted.1
Inclusion at the second death
Under 26 U.S.C. § 2044 the surviving spouse's gross estate includes the value of any property in which that spouse had a qualifying income interest for life and for which a deduction was allowed under § 2056(b)(7), unless § 2519 applied to an earlier disposition. The property is then treated as passing from the surviving spouse.2 The deduction at the first death is therefore a deferral.
The Illinois election
The Illinois tax is measured by the "state tax credit" defined in 35 ILCS 405/2, computed "with reduction to the adjusted taxable estate for any qualified terminable interest property election." Subsection (b-1) provides the election: the person required to file the Illinois return "may elect on a timely filed Illinois return a marital deduction for qualified terminable interest property under Section 2056(b)(7) of the Internal Revenue Code for purposes of the Illinois estate tax that is separate and independent of any qualified terminable interest property election for federal estate tax purposes." Where a State or federal election is made, "the trustee may not retain non-income producing assets for more than a reasonable amount of time without the consent of the surviving spouse."4
The Attorney General's instructions add the procedure. The election is made on a timely filed Illinois return by checking the election box, entering the dollar amount, and giving the surviving spouse's social security number, with a list of the Illinois QTIP property. The Illinois election "will follow federal statutes and rules for treatment of elected property passing to the surviving spouse and inclusion on the Return of the surviving spouse." The return and tax are due nine months after death, and extensions may be requested.3
Form 700
- Line 1, tentative taxable estate from the federal return
- First death, election made in this estate
- As reported
- Second death, election made in the prior estate
- As reported
- Line 2, Illinois QTIP election
- First death, election made in this estate
- Amount elected in this estate
- Second death, election made in the prior estate
- Amount from the prior estate's election
- Line 3, Illinois tentative taxable estate
- First death, election made in this estate
- Line 1 minus line 2
- Second death, election made in the prior estate
- Line 1 plus line 2
The published example, carried to the second death
The Attorney General publishes this case: a decedent with an estate of $13,610,000, a surviving spouse, and an Illinois QTIP election of $9,610,000. Illinois estate tax: $0. Federal estate tax: $0.3 Line 3 is $13,610,000 less $9,610,000, or $4,000,000, which does not exceed the exclusion amount.
- Everything passed outright to the surviving spouse
- Illinois tentative taxable estate at the second death
- $13,610,000
- Illinois tax at the second death
- $1,417,586
- $4,000,000 outside the election, Illinois QTIP election of $9,610,000
- Illinois tentative taxable estate at the second death
- $9,610,000
- Illinois tax at the second death
- $877,832
- Difference
- Illinois tentative taxable estate at the second death
- $4,000,000
- Illinois tax at the second death
- $539,754
The difference comes from the $4,000,000 that used the first decedent's exclusion. The QTIP election itself defers the tax on the $9,610,000; it does not reduce it.
Federal and Illinois compared
For 2026 the federal basic exclusion amount is $15,000,000.6 A surviving spouse may also use the deceased spousal unused exclusion amount, but only if the executor of the deceased spouse's estate files an estate tax return that computes the amount and elects it.7 For Illinois, "the portability and carry-over of the unused federal exemption to the surviving spouse is inapplicable to the computation and assessment of the Illinois Estate Tax."3 An Illinois-only QTIP election can therefore be available, if the property qualifies and the Illinois return is filed on time, even when the estate owes no federal tax and makes no federal QTIP election.4
Civil unions
An Illinois marital deduction, including QTIP elections under 35 ILCS 405/2(b-1), is allowable for property passing to a partner in a civil union recognized under 750 ILCS 75, to the same extent as for a husband or wife.3
Not covered here
Lifetime transfers to a QTIP trust. A surviving spouse who is not a United States citizen, for whom § 2056(d) disallows the deduction except as that subsection provides.1 Formula and partial elections, and provisions that depend on whether the election is made. The generation-skipping transfer tax. The income taxation of the trust. Valuation, and the tax situs of the trust's assets.
