Cannon Certified Trust And Fiduciary Advisor (CTFA) Practice Test

The concept here is how a QTIP (qualified terminable interest property) trust works in blended estate and gift tax planning. A QTIP trust lets the first spouse’s assets qualify for the marital deduction while preserving control over who ultimately benefits after the surviving spouse dies. The surviving spouse must receive all the net income from the trust for life (or for a term) and the remainder can be limited to other beneficiaries as defined by the grantor or trustee. This means the surviving spouse doesn’t have free rein to determine the ultimate disposition of the trust property; the trust terms still govern who will receive the assets after the spouse’s death. The statement that is false concerns the allocation of generation-skipping transfer (GST) tax exemption. In reality, the grantor-spouse’s GST exemption can be allocated to trust property, including QTIP property, to shield future transfers to skip persons (like grandchildren) from GST tax. This allocation is a planning tool available under the GST exemption rules, and it’s not correct to say it cannot be allocated to QTIP trust property. So, the other statements align with how QTIP trusts operate: the executor can elect to treat all or part of the marital trust as QTIP, the spouse-beneficiary does not need to control the ultimate disposition, and the spouse must be entitled to all the net income for the QTIP to be valid.