What constitutes a Qualified Transfer (QT)?

A Qualified Transfer (QT) refers specifically to payments that are made directly to an educational institution or a medical facility for the purpose of covering expenses incurred by the recipient. Therefore, payments made directly to a hospital or school are considered Qualified Transfers because they are excluded from being subject to gift tax and can be made without the limitations that apply to gifts given to individuals.

This special treatment under tax law allows individuals to support educational and medical expenses without impacting their gift tax exclusion limits, which can be quite beneficial in estate and tax planning.

While payments directly to a charity can be tax-deductible, they do not meet the specific criteria of a Qualified Transfer since they are not aimed at covering the recipient’s medical or educational expenses. Similarly, transferring property between family members or making gifts under a legal contract generally fall under standard gift tax considerations and do not meet the specific definition of a Qualified Transfer.