How a QTIP or QDOT Trust Might Fit into Your Tennessee Estate Plan

Published On - April 18, 2025

Stan Bennett Estate Planning

Estate planning becomes increasingly complex when your family includes children from a previous relationship or a spouse who is not a U.S. citizen. If you are estate planning for a blended family, you may be wondering how to provide for your spouse while ensuring that your children inherit what you want them to have whereas marriage to a non-citizen makes relying on the “unlimited marital deduction” tricky when planning your estate. A Murfreesboro estate planning attorney at Bennett | Michael | Hornsby explains how a Qualified Terminable Interest Property (QTIP) trust and/or a Qualified Domestic Trust (QDOT) can help you resolve these dilemmas in your Tennessee estate plan.

Planning for a Blended Family with a QTIP Trust

A QTIP trust is often used by individuals who have children from a prior marriage and want to ensure that those children ultimately receive an inheritance while still providing for a current spouse. Without a QTIP trust, you may feel forced to choose between leaving everything to your surviving spouse or leaving assets outright to your children with neither option providing an ideal solution. Leaving everything to your spouse requires a great deal of trust, and there is no legal obligation for that spouse to pass those assets on to your children. On the other hand, leaving assets directly to your children might not provide the financial support your spouse needs after your death.

A QTIP trust allows you to strike a balance between these two less than ideal options. When you establish a QTIP trust, you fund the trust with assets that will be managed by a Trustee of your choosing. Upon your death, the trust provides income to your surviving spouse for life, but your spouse cannot access the principal or change the beneficiaries. Your spouse may also receive the right to live in a home held by the trust through what is known as a life estate, but they do not own the property outright. When your spouse passes away, the assets in the QTIP trust pass to the beneficiaries you named, typically your children.

A QTIP trust offers peace of mind in situations where family dynamics are complex, ensuring that your children are not unintentionally disinherited and that your current spouse is not left without support. Additionally, your estate may still take advantage of the federal marital deduction by having your Executor elect QTIP treatment on your estate tax return, which can help delay any tax liability until after your spouse passes away.

Planning for a Non-Citizen Spouse with a QDOT Trust

Married couples frequently rely on the “unlimited marital deduction” which allows you to leave an unlimited amount of assets to your spouse without incurring estate taxes. If your spouse is not a U.S. citizen, however, the federal estate tax rules are significantly different. Instead of an “unlimited” marital deduction, you can only pass down assets valued at up to $190,000 (as of 2025) tax-free. The concern is that your spouse could move assets overseas, and the IRS would have no way to collect taxes upon your spouse’s death.

A Qualified Domestic Trust, or QDOT, can provide a solution if your spouse is not a U.S. citizen. Instead of transferring assets directly to your non-citizen spouse, you transfer them into the QDOT. Like a QTIP trust, a QDOT allows your spouse to receive income generated from the trust; however, your spouse cannot access the trust principal except under very limited conditions. Withdrawals of principal must meet a strict “hardship” standard, meaning that your spouse must demonstrate an “immediate and substantial” need for funds related to health, maintenance, education, or support, either for themselves or someone they are legally obligated to support, such as a child.

When your spouse passes away, the assets remaining in the QDOT are passed to the beneficiaries you have named in the trust. Any estate taxes that were deferred at the time of your death must be paid before assets are distributed. This ensures that the IRS eventually receives the taxes owed, while still allowing your spouse to benefit from the income during their lifetime.

How These Trusts Fit into a Tennessee Estate Plan

In a blended family, a QTIP trust gives you control and security, allowing you to care for your spouse while protecting your children’s inheritance. For marriages involving a non-citizen spouse, a QDOT allows you to take advantage of estate tax deferral options that would otherwise be unavailable. If you are creating or updating an estate plan in Tennessee and you have a blended family or a non-citizen spouse, consult with an experienced estate planning attorney to determine whether one of these trusts is appropriate for your situation. 

Contact a Murfreesboro Estate Planning Attorney 

If you have additional questions or concerns about how a QTIP or QDOT trust might fit into your Tennessee estate plan, contact an experienced Murfreesboro estate planning attorney at Bennett | Michael | Hornsby as soon as possible. Contact the team today by calling 615.898.1560 to schedule your free appointment.

 

Stan Bennett
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