Why Choose A Marital Trust
QTIP trusts offer a number of benefits. Qualified Terminable Interest Property Trusts, or QTIPs, provide for surviving spouses while allowing the grantor to retain control over the trust assets.
Generally, people with children from prior marriages use QTIPs as irrevocable trusts. Having a QTIP allows the grantor to protect their spouse and ensure their assets are eventually transferred to their choice of beneficiaries. It may be an offspring or grandchild of the grantor who is the beneficiary, or it may be another member of the grantor’s family or a friend.
The QTIP provides income to the surviving spouse and limits the extent of estate and gift taxes that will apply. As long as the trust is in place after the death of the first spouse, the trust will provide income to the surviving spouse and qualify as a marital deduction. QTIP trust property will, however, be included in the estate of the surviving spouse, and the value of their own assets, as well as the estate tax exemption in effect at the time of death, will determine whether estate taxes are payable.
Moreover, since the surviving spouse never assumes the power of appointment over the principal, the QTIP can control the disposal of assets when the spouse passes away. In cases where there are multiple marriages and children from different families, this is particularly important. If the living spouse were to remarry, they would not be able to transfer those assets to their new spouse. If the living spouse were to remarry, they would not be able to transfer those assets to their new spouse.
The trust must be managed by at least one trustee, but multiple trustees may be named. Trustees control trust assets under their management and are responsible for controlling the trust. In addition to the surviving spouse, another family member or friend may serve as a trustee, as well as a financial institution or estate planning attorney.
As with stock dividends, income from QTIP trusts is usually shared by the surviving spouse named in the trust. A trust can only be created to suit a couple’s needs if the grantor allows payments from the principal.
