Generally, to qualify for the marital deduction and avoid estate tax when you die, your property must pass to your spouse directly or in a trust where he has complete control over the principal. A Qualified Terminable Interest Property Trust (QTIP Trust) is an exception to this rule.
A QTIP Trust allows you to separate your property into two parts. One part is the interest or income the principal generates. The other part is the principal itself. An example is stocks and bonds (the principal) and dividends and interest (income).
By separating your property this way, you can direct that each piece benefits a different person. So long as the QTIP Trust directs that your spouse receives all of the income from the trust during his lifetime, the QTIP Trust will qualify for the marital deduction and no estate tax will be due.
QTIP Trusts are commonly used in the situation where there is a second marriage. The spouse who has children from a first marriage wants to ensure that his children receive the principal and also wants to ensure that his surviving second spouse will benefit from the interest generated. The QTIP Trust allows for both.
Consult your estate planning attorney for further information.