The Benefits of a QTIP Trust
The QTIP trust is one of the most useful tools for building your estate plan. The acronym stands for Qualified Terminable Interest Property and is straight out of the Internal Revenue Code. This is the kind of trust that qualifies for the federal estate tax* marital deduction by giving your spouse income for life but no control over the principal.
How a QTIP Trust Can Help
A traditional estate trust that qualifies for the marital deduction can protect your principal during your surviving spouse’s lifetime. Under this plan, you must give him or her the right to choose the eventual beneficiaries at his or her own death. The QTIP trust, however, ensures that your wishes are carried out. It qualifies for the marital deduction without ever giving your spouse control over principal.
The trust income will be paid to your spouse for life. And you can give your trustee discretion to supplement this from principal if needed to maintain a proper standard of living. After your spouse’s lifetime, the balance will be distributed to those you have named.
For greater flexibility, you can give your spouse the power to adjust the shares passing to children, grandchildren or charitable organizations like the Alliance for the Arts.
For more information, please contact us at (805) 449-2590.
*Currently federal estate taxes are repealed for any deaths that occur in the calendar year 2010. In 2011 and beyond, estate taxes are reinstated in full. Congress has declared its intent to change the laws to reinstate federal estate taxes sometime in 2010. What the final legislation will look like is unknown at this point. Check back for future updates.
Click on the Links Below for Additional Information:
- Providing for Your Special Needs Loved Ones
- When Do You Need a Trust?
- Financial Quiz for Couples
- Choose the Right Trust
- Estate Planning Overview
- Will New Tax Laws Affect My Plan?
- Glossary of Terms
The information in this website is not intended as legal advice. For legal advice, please consult an attorney. Figures cited in examples are for hypothetical purposes only and are subject to change. References to income tax apply to federal taxes only. Federal estate tax, state income/estate taxes or state law may impact your results.