There are legal terms that have very wordy names, and as a response, a lot of acronyms are used to make the terms more manageable to talk about. We dissect these terms from time to time on our blog, and today we will look at the legal device that is commonly called a QTIP trust.
In this context, the acronym stands for a qualified terminable interest property trust. Now that you see the actual name of the trust, you can see why people shorten it by using the term QTIP.
This type of trust can be useful for people who are getting remarried who have children.
When you are entering into a second marriage, you may have estate planning concerns. You probably want to provide resources for your new spouse when you are creating your estate plan, but what about your children? If you leave everything to your second spouse, there are no guarantees with regard to how your spouse will plan his or her estate.
This type of situation can be addressed through the creation of a QTIP trust. To implement this estate planning strategy, you fund the trust, and you name a trustee to administer the trust after your passing.
Your spouse would be the initial beneficiary of the trust. If you do in fact die first, your spouse would receive income from the trust’s earnings throughout his or her life. You could also allow the trustee to distribute a portion of the principal under certain circumstances if this is your choice.
If you are trying to protect the interests of your children, you would make your children the secondary beneficiaries of the trust. After the death of your spouse, the assets in the QTIP trust would be distributed to the secondary beneficiaries.
Your surviving spouse would have no ability to change the beneficiaries or assume full control over the assets in the trust, so you can be sure that your own wishes would be carried out after you pass away.
A QTIP trust can serve as a viable estate planning solution if you are a parent who is getting remarried.
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Estate planning is a personalized endeavor. Every situation is different, and every family is unique.
As you can see from this blog post, there are estate planning devices that many people have not heard of that can be extremely useful. This is why you should discuss everything in detail with a licensed estate planning attorney before you make any decisions.
We offer free consultations, and we would be glad to answer your questions, become apprised of your situation, and make recommendations.
To set up an appointment, send us a message through this link: Southampton PA Estate Planning Attorneys.