The Nuts and Bolts of a QTIP Trust

Posted on : March 30, 2018, By:  George Dillon

Max married his second wife, Melissa, a few years ago. Her three children from her first marriage were happy for their mom but were also a little concerned about the inheritance Melissa had told them would be theirs. Would everything go to Max if Melissa passed away first? Would Max’s son get part of the wealth Melissa had worked hard to build? Fortunately, Melissa knew about QTIP trusts.

QTIPS Basics

If you’re expecting to hear about cotton glued to the end of small sticks, think again.

QTIP in this context means Qualified Terminable Interest Property Trust. When one spouse is wealthier than the other, lifetime QTIPs can come in handy.

As with any trust, there’s a

  • settlor who creates and funds the trust,
  • a trustee who manages trust assets, and
  • at least one beneficiary.

QTIP trusts allow the settlor (the wealthier spouse) to provide for a surviving spouse (the less wealthy spouse). Through the trust document, the grantor controls how the trust assets are distributed once the surviving spouse passes away.

Max and Melissa have a blended marriage with children from prior relationships. A QTIP trust may offer certain benefits:

  • The parties get relief from applicable death and gift taxes.
  • Trust assets remain with the grantor’s family instead of to the new spouse and his or her children.
  • The trust is protected from the surviving spouse’s creditors.
  • Trust payments are not transferable. Only the surviving spouse receives the distributions.
  • Unlike Wills, trust records do not become part of public record.

When Melissa meets with her estate planning attorney, she may decide to set up a QTIP trust. Max will be able to enjoy the lifestyle he’s come to enjoy during their marriage. Her children will rest easy knowing their inheritance is safe from Max, his creditors, and his son. For Melissa, the QTIP trust allows her to care for everyone in her family.

Learn More About Trusts and Your Estate.

After consulting with an attorney, you may decide that establishing a QTIP trust is not the right solution for you. Your attorney has other estate planning tools that may help you prepare an estate plan that fits your circumstances.

At Dillon Law Group, PLC, your estate is in good hands. Our attorneys work with you to make thoughtful decisions about your future. Give us a call at 757-962-4796 or use our convenient Contact Form. We assist clients in the Virginia Beach and Newport News areas.

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