What Is a QTIP Election in Estate Planning?

A QTIP election in estate planning is a choice the executor of a deceased spouse’s estate makes on the federal estate tax return to treat qualified terminable interest property, typically a trust that pays all its income to the surviving spouse for life, as qualifying for the unlimited marital deduction. The election defers federal estate tax on the trust assets until the surviving spouse dies, while locking in the first spouse’s choice of who ultimately receives the principal. It is the tool that lets you provide for a surviving spouse without giving up control over where the property goes next.

What the Trust Must Look Like to Qualify

A QTIP trust splits the benefit of property in two: the surviving spouse gets a lifetime income stream, and a remainder interest passes to beneficiaries the deceased spouse chose. The spouse collects income but never controls the principal. That combination is a “terminable interest,” which ordinarily would not qualify for the marital deduction, and the QTIP election is what overrides that rule.¹

Internal Revenue Code Section 2056(b)(7) sets three conditions:

The surviving spouse must be entitled to all income from the trust, paid at least annually. A trust that accumulates income or leaves distributions to the trustee’s discretion does not qualify.
No one, including the surviving spouse, may have the power to direct any part of the principal to anyone other than the surviving spouse during the spouse’s life. A power exercisable only after the spouse’s death is fine.
The executor must affirmatively elect QTIP treatment on the federal estate tax return. Without the election, the marital deduction is lost and the property is taxed in the first spouse’s estate.²

The surviving spouse must also have a practical ability to make the property productive. If the trust holds low-yielding assets, the spouse needs the right to compel the trustee to sell and reinvest in income-producing property. Federal regulations treat this right as part of what makes the income interest meaningful.³

Why an Executor Would Make the Election

The classic case is a blended family. If you remarry and want your second spouse to live comfortably after your death but also want children from your first marriage to eventually inherit, a QTIP trust removes the tradeoff. Your spouse receives income for life, and your children receive the remaining principal after your spouse dies, exactly as you directed.

QTIP planning also gives couples in first marriages a way to take full advantage of both spouses’ estate tax exemptions. The executor can decide how much property receives the marital deduction by making a full or partial election, creating room for post-death tax planning that an outright bequest to the spouse cannot match. For 2026, the federal estate tax exemption is $15,000,000 per person, so most estates will not owe federal tax at either death, but the ability to direct where wealth ultimately lands still drives the planning.⁴

How and When the Election Is Made

Only the executor of the deceased spouse’s estate can make the QTIP election. It is made on Form 706, the federal estate tax return, by listing the qualified terminable interest property on Schedule M and inserting its value. The IRS presumes the election is made for the entire listed property unless the executor specifically identifies a fractional portion as not subject to the election.⁵

Deadlines and Irrevocability

Form 706 is due within nine months of the decedent’s death. The executor can request an automatic six-month extension using Form 4768, which pushes the deadline to fifteen months. If the executor files a return without making the QTIP election, a supplemental return to add the election cannot be filed after the original due date, including extensions.⁶

Once made, the election is irrevocable. The executor cannot undo it on an amended return. That finality makes the decision high-stakes, particularly when the executor is weighing whether to use the deceased spouse’s exemption, make a portability election, or some combination.²

Partial Elections

An executor does not have to elect QTIP treatment for the whole trust. A partial election is permitted, but it must be expressed as a fraction or percentage of the property, not a specific dollar amount. The fraction or percentage can be defined by a formula. When a trust is divided to reflect a partial election, the split must be based on the fair market value of trust assets at the time, though the resulting separate trusts do not have to hold a pro rata share of each individual asset.³

Partial elections let executors calibrate. A common approach is to elect QTIP treatment only for the portion of the trust that exceeds the deceased spouse’s available exemption, sheltering the rest through the unified credit with no deferred tax at the second death.

What Happens at the Surviving Spouse’s Death

When the surviving spouse dies, the full fair market value of the QTIP property is pulled into their gross estate under Internal Revenue Code Section 2044. The surviving spouse’s estate applies its own exemption against that value.⁷

Because the property is included in the surviving spouse’s gross estate, it receives a new cost basis equal to fair market value at the date of the surviving spouse’s death. Section 1014(b)(10) extends this treatment to property included under Section 2044. If the trust holds assets that appreciated during the surviving spouse’s lifetime, the remainder beneficiaries take them at the higher value and owe no capital gains tax on the pre-inheritance growth.⁸

Federal law also gives the surviving spouse’s estate the right to recover the estate tax attributable to the QTIP property from the person or trust that receives it. In effect, the QTIP trust itself bears the additional tax, not the surviving spouse’s other beneficiaries. The deceased spouse’s will or revocable trust can waive this right of recovery, shifting the tax burden onto the surviving spouse’s estate. Whether that waiver exists can change how much each set of beneficiaries actually takes home, so it deserves close attention when the documents are drafted.⁹

Coordinating With Portability

Portability lets a surviving spouse use the deceased spouse’s unused estate tax exemption, known as the Deceased Spousal Unused Exclusion amount. A QTIP election and a portability election can work together, but they interact.

A partial QTIP election consumes some of the deceased spouse’s exemption to shelter the non-elected portion, leaving less unused amount available to port. A full QTIP election runs the entire trust through the marital deduction, using none of the deceased spouse’s exemption and potentially leaving the full amount available for portability. The executor is essentially choosing between locking in tax protection now through the exemption or deferring it through the marital deduction and relying on portability.

One advantage of pairing a QTIP trust with portability is that QTIP assets receive a step-up in basis at the surviving spouse’s death, capturing appreciation between the two deaths. Assets sheltered in a traditional bypass trust at the first death do not get that second step-up.

Traps to Watch For

Lifetime Transfer of the Income Interest

If the surviving spouse gives away or sells the income interest during their lifetime, the consequences are severe. Under Internal Revenue Code Section 2519, disposing of any part of the qualifying income interest is treated as a transfer of all remaining interests in the property, not just the income stream. The surviving spouse is treated as making a taxable gift of the entire remainder, which can trigger gift tax on the full value of the trust principal.¹⁰

Surviving spouses almost never voluntarily trigger Section 2519, but the rule can spring accidentally through a settlement agreement, divorce decree, or other transaction that touches the income interest.

IRAs Held in a QTIP Trust

An IRA can qualify for QTIP treatment if a marital trust is named as the IRA beneficiary, but the requirements are more exacting than for other assets. The surviving spouse must have the power, exercisable each year, to compel the trustee to withdraw the income earned on the IRA assets and distribute it to the spouse. Alternatively, the trust terms can direct the trustee to withdraw all IRA income annually and pay at least that income to the spouse. When the spouse exercises the withdrawal power, the trustee must withdraw the greater of all IRA income or the required minimum distribution and distribute at least the income portion to the spouse.¹¹

Trust language for an IRA beneficiary trust needs to be drafted with this ruling specifically in mind. Getting it wrong can disqualify the IRA from QTIP treatment and waste the marital deduction on what may be the largest asset in the estate.

Automatic Election for Survivor Annuities

Certain survivor annuities receive automatic QTIP treatment without any action by the executor. When an annuity is included in the deceased spouse’s gross estate and only the surviving spouse has the right to receive payments before their death, the tax code treats the executor as having made the QTIP election. The executor can opt out on Form 706, but if no action is taken, the annuity qualifies for the marital deduction by default. The opt-out, like the standard election, is irrevocable once made.²

1
eCFR. 26 CFR 20.2056(b)-1 – Marital Deduction; Limitation in Case of Life Estate or Other Terminable Interest
2
Office of the Law Revision Counsel. 26 USC 2056 – Bequests, Etc., to Surviving Spouse
3
eCFR. 26 CFR 20.2056(b)-7 – Election with Respect to Life Estate for Surviving Spouse
4
Internal Revenue Service. Whats New Estate and Gift Tax
5
Internal Revenue Service. Instructions for Form 706 (09/2025) – Schedule M
6
Internal Revenue Service. Instructions for Form 706 (09/2025)
7
Office of the Law Revision Counsel. 26 USC 2044 – Certain Property for Which Marital Deduction Was Previously Allowed
8
Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent
9
Office of the Law Revision Counsel. 26 USC 2207A – Right of Recovery in the Case of Certain Marital Deduction Property
10
Internal Revenue Service. Revenue Ruling 98-8 – Section 2519 Dispositions of Certain Life Estates
11
Internal Revenue Service. Revenue Ruling 2006-26 – QTIP Treatment for IRAs