To create a successful estate plan, you must first consider your unique needs and goals. For example, if you are part of a blended family, your needs and goals will likely not be the same as they were during your first marriage. Now, you may be trying to provide for your current spouse while simultaneously protecting assets that are meant for your children from a previous marriage. One common estate planning tool that is used to accomplish both of those goals is a specialized type of trust known as a Qualified Terminable Interest Property, or QTIP, trust. To help you better understand how you might benefit from creating a QTIP trust, the Glastonbury estate planning attorneys at Nirenstein, Horowitz & Associates, P.C. explain the purpose of a QTIP trust.
Creating a Blended Family
As you likely already know, approximately 50 percent of all first marriages end in divorce. About the same percentage (50 percent) of the spouses who get divorced enter into a second, or subsequent, marriage. Often, those new marriages must blend existing families into one family – a task that is rarely without obstacles and challenges. In a best case scenario, everyone learns to get along and truly becomes a family. Unfortunately, that doesn’t always happen. The death of one spouse can cause the family discord to surface and may even lead to costly litigation. It isn’t always possible to create a harmonious blended family. You can, however, take steps to prevent a bitter court battle after your death through comprehensive estate planning. For example, if one of your concerns is providing for your current spouse without putting assets intended for your children from a previous marriage at risk, a QTIP trust may be the answer.
Why A QTIP Trust May Be Necessary
During your first marriage, your plan was likely to leave all your assets to your spouse. Your spouse then created a reciprocal estate plan. The understanding between the two of you was that the last one to go would then pass those assets on down to your children. Once divorced though, that plan no longer works. You could leave everything to your new spouse and hope the assets get passed down to your children upon death. That would require you to have absolute faith that your spouse would follow your wishes and not deplete the assets because once you are gone, your spouse will have complete control over those assets with no legal constraints on their use. Your children could wind up with nothing. A QTIP trust prevents that possibility while still providing for your spouse.
What Is a QTIP Trust?
A QTIP trust operates in basically the same way as any other trust with some special terms designed to provide for your spouse while protecting your children’s inheritance. You will need to appoint a Trustee to oversee the administration of the trust and to manage the trust assets. Assets transferred into the QTIP trust are not actually gifted to your current spouse when you die. Instead, your spouse receives income from the trust assets but cannot withdraw the principal from the trust nor can he or she decide on the ultimate disposition of the trust assets. In the case of real property, your surviving spouse may also receive a “life estate” in the property, meaning that he or she may remain in the home until death, but will never own the property outright. When your surviving spouse dies all assets held in the trust are then transferred to the intended QTIP trust beneficiaries, typically your children from a previous marriage.
Contact Glastonbury Estate Planning Attorneys
For more information, please join us for one of our upcoming FREE seminars. If you have additional questions or concerns regarding a QTIP trust and how it might fit into your estate plan contact the experienced Glastonbury estate planning attorneys at Nirenstein, Horowitz & Associates, P.C. by calling (860) 548-1000 to schedule an appointment.