The Terms of Spousal Trusts tab defines how any trust created for a surviving spouse will operate.
The type of trust—Credit Trust, Disclaimer Trust, Family Trust, Marital Trust, or Residuary Trust—is selected on the Disposition at First Death tab. That tab determines whether and which spousal trust structure is created.
This tab determines the distribution standards, powers, and administrative features of the selected trust.
These provisions apply in:
Will-based and revocable trust–based plans
Married couples
Unmarried couples planning in contemplation of marriage
The available terms for each trust are limited to the funding structure selected on the Disposition at First Death tab.
Oregon Estate Tax Elections
For Oregon estates, the personal representative may also have flexibility when determining the final estate tax treatment of property passing to a surviving spouse. Oregon law permits both state-only QTIP elections and the Oregon Special Marital Property (OSMP) Election. These elections are made on the Oregon estate tax return and may allow property passing to a surviving spouse or to certain trusts for the spouse to qualify for the Oregon marital deduction even if no federal QTIP election is made. As a result, the final Oregon estate tax treatment of a spousal trust may depend on both the selected trust terms and the elections made after death.
Credit Trust
If a Credit Trust is selected, this section defines how income and principal may be distributed to the surviving spouse during the spouse’s lifetime.
You must choose between:
QTIP structure (marital deduction–eligible), or
Non-QTIP structure (non-marital deduction treatment)
For either structure, you determine whether principal distributions are limited to a HEMS standard or may be made in the discretion of an Independent Trustee.
You may also select:
Whether additional discretionary principal beneficiaries are included (which could preclude an OSMP election)
Whether the surviving spouse holds a testamentary limited power of appointment
Disclaimer Trust
If a Disclaimer Trust is selected, this section defines how income and principal may be distributed if assets are disclaimed at the first death.
As with the Credit Trust, you choose between:
QTIP (marital deduction–qualified), or
Non-QTIP (bypass-style) treatment
You then select the applicable distribution standard (HEMS or Independent Trustee discretion).
Because Disclaimer Trusts must comply with IRC § 2518, additional discretionary beneficiaries and powers of appointment are not available options.
Family Trust
If the Family Trust option is selected on the Disposition at First Death tab, all of the first spouse’s assets pass to a single trust for the benefit of the surviving spouse. This structure is commonly used regardless of whether the estate is taxable. It consolidates first-death planning into one trust and allows post-death flexibility through federal QTIP elections and, in Oregon estates, through state-only Oregon QTIP elections or the Oregon Special Marital Property (OSMP) Election, either of which may allow property passing to the trust to qualify for the Oregon marital deduction.
You must choose between:
QTIP structure (marital deduction–eligible), or
Non-QTIP structure (non-marital deduction treatment)
You then select the principal distribution standard (HEMS or Independent Trustee discretion) and determine whether:
Additional discretionary principal beneficiaries are included (which could preclude an OSMP election)
The surviving spouse holds a testamentary limited power of appointment
Note, adding additional discretionary beneficiaries will eliminate qualification for a QTIP martial deduction election, even if you've otherwise chosen a mandatory income distribution standard.
Marital Trust
If a Marital Trust is selected on the Disposition at First Death tab, assets are directed to a trust specifically structured to qualify for the federal marital deduction. This trust is drafted as QTIP-eligible from the outset. It does not rely on post-death subdivision for qualification.
Because the trust is intended to qualify for the marital deduction:
Mandatory annual distribution of all net income to the surviving spouse is required.
Principal may be distributable under a HEMS standard or in the discretion of an Independent Trustee.
You may also grant the surviving spouse a testamentary limited power of appointment, allowing the spouse to redirect remaining trust assets at death within the defined permissible class.
Residuary Trust
A Residuary Trust is used in more specialized planning structures, typically in conjunction with GST allocation strategies or formula-based dispositions at the first death.
Like the Marital Trust, the Residuary Marital Trust is structured to qualify for the federal marital deduction and therefore:
Requires mandatory annual distribution of all net income to the surviving spouse.
Permits principal distributions under a HEMS standard or in the discretion of an Independent Trustee.
A testamentary limited power of appointment may also be granted to the surviving spouse.
If Any Spousal Trust Is Structured as a QTIP-Eligible
If a spousal trust is drafted to qualify for QTIP treatment—whether a Credit Trust, Disclaimer Trust, Family Trust, Marital Trust, or Residuary Marital Trust—the document automatically includes a dedicated Marital Deduction Article governing marital deduction qualification and administration.
That Article addresses:
Intent to qualify for federal and applicable state QTIP marital deductions
Authority to make disparate federal and state QTIP elections
Administration of QTIP-elected and non-QTIP-elected portions as separate trusts if different elections are made
Special conduit trust rules governing retirement benefits payable to a QTIP-elected trust (i.e., a trust requiring mandatory income distributions)
GST transferor status and potential reverse QTIP elections
Allocation and recovery of estate taxes attributable to includable marital trusts under IRC 2207A
What About a Clayton QTIP?
Many users have asked whether Agile EP's templates include a "Clayton QTIP Option" at the first death. The answer is “technically, no, but practically speaking, yes”.
The Clayton-style flexibility applies only when the Family Trust structure is selected.
In a traditional Clayton structure:
Property passes to a QTIP trust only to the extent a QTIP election is made.
Any portion for which no election is made passes to a Credit Trust.
Under the Family Trust approach:
All assets pass into a single Family Trust under the governing instrument.
Before funding, the trust may be divided into separate administrative shares.
The Personal Representative may make federal and/or state QTIP elections over some or all of those shares.
The key distinction is structural simplicity: separate Credit and Marital Trusts are not created at the outset. Flexibility is achieved through subdivision and selective QTIP elections within the single Family Trust framework.
For this approach to function as intended, the Family Trust distribution terms must satisfy QTIP requirements. This is a seprate state-only election from the Oregon Special Marital Property Election.