We have all heard of a QTIP, but do you know what it means in the context of estate planning?
If you are in a second or third marriage, as many people are in San Diego, you may know that a QTIP is a type of trust. It is a common type of trust which provides for your current spouse but also ensures that ultimately your estate will pass to your own children.
QTIP actually stands for Qualified Terminable Interest Property and is often used in cases of blended families where there are “his”, “hers”, and “their” children. For example, a husband may set up a QTIP trust to provide income for his second wife when he dies.The husband names his children from his first marriage to be the ultimate beneficiaires when his wife dies. There are some strict guidelines for such a trust which an experienced estate planner can explain to you. Some of those are that all of the income from the trust must go to the surviving spouse for her lifetime. The surviving spouse cannot use trust assets to benefit a new spouse or her own children. When the surviving spouse dies, the remainder of the trust must go to whoever the Settlor has designated in the trust document, which in this example would be the husband’s children.
QTIP Trusts are expecially appropriate where estate taxes might be involved. In 2009 this is estates of married couples with assets over $7 million. If taxes are not an issue, there are other options for blended families including customized language in your trust in which your trustee makes payments to the surviving spouse for his or her support and then upon the death of the surviving spouse, to the your children. You can also leave your current spouse a life estate in a home that was yours before marriage and shared together during your marriage. When your spouse dies, the home goes to your children.
Multiple marriages, where both spouses have children from prior marriages, is not an area for do-it-yourself trusts or inexperienced lawyers. At Law Office of Scott C. Soady, A Professional Corporation we have been helping such families for years in determining what type of customized trust is appropriate to accomplish your goals. Call us or email us to set an appointment.