QTIP trusts are excellent options for a number of married couples, especially those who have been married two or more times, or those with blended families. However, not many people understand what a QTIP trust is, what the benefits are, or even what it stands for. Below, we’ve answered a few of the most common questions we field at our office regarding remarriage, estate planning, and QTIP trusts.
What does QTIP stand for?
QTIP stands for qualified terminable interest property trust. Now you see why everyone sticks with “QTIP.”
How does a QTIP trust work?
A QTIP trust allows a person to leave the bulk of their property to two different groups of people over time. After a person’s death, their spouse receives all income from the trust each year. When the second spouse dies, the trust is given to another group, usually the person’s children from a previous marriage.
Who is most likely to benefit from a QTIP trust?
QTIP Trusts are almost always used by people who have been married more than once. This is because it allows blended families to fairly share the deceased’s estate while avoiding many common conflicts: both the new spouse and the children from the previous marriage benefit, and all of the decision making regarding the estate is complete. However, there are a few less common reasons choose a QTIP trust while planning your estate. For example, if a spouse is worried about their spouse caring for the estate after his or her death, a QTIP can ensure that the surviving spouse is cared for even if they do not control the estate.
What are the advantages of the QTIP trust?
If you are remarried and have children from a previous marriage, the major advantage of a QTIP trust is the ability to leave much of your estate to your children while still caring for your current spouse until his or her death. In addition, a QTIP trust takes full advantage of the unlimited marital deduction when it comes to estate tax law.
Does a QTIP trust eliminate estate taxes?
While a QTIP trust does not eliminate the estate tax, it does delay payment of the tax. Under the unlimited marital deduction laws, the second spouse will not have to pay estate taxes if he or she is a United States citizen. However, when the surviving spouse dies and the trust passes to children from a previous marriage, taxes will need to be paid.
San Francisco Bay Area Estate Planning Attorney
Planning your estate after a marriage or after blending families can be a sensitive and complex matter. To learn more about QTIPs, trusts, and estate planning after remarriage in California, call The Law Office of Janet Brewer today to schedule a consultation with an experienced attorney: (650) 325-8276.