Sam and Emma married several years ago. It was the second marriage for both of them, though both had children from previous relationships. Sam’s children from were happy, but also concerned about their inheritance. Would everything go to Emma if Sam passed away first? Would Emma’s daughter receive an equal share of the wealth Sam had worked so hard to build? Fortunately, Sam’s attorney had advised him to establish a qualified terminable interest property (QTIP) trust.
An Estate Planning Tool
A QTIP trust is a tool that comes in handy when one spouse is significantly wealthier than the other. This is especially true if the spouse with the greater net worth has children from a previous marriage.
QTIP trusts, like all trusts, consist of:
- A grantor, settlor, or trust maker who signs the trust document and transfers assets to the trust,
- A trustee who will manage the trust assets, and
- At least one beneficiary.
Some trusts provide regular distributions to beneficiaries, while others disburse money upon the grantor’s death. QTIP trusts provide support to the surviving spouse of the grantor until his or her death. At that time, the remaining trust assets are distributed in compliance with the trust document. Often the beneficiaries are children from prior marriages.
In a marriage like Sam and Emma’s, a QTIP trust offers the following benefits:
- Relief from potential death and gift taxes.
- The grantor’s family retains the trust assets, not the spouse and his or her children.
- The surviving spouse’s creditors cannot take or put a lien against property in the trust.
- Trust payments are not transferable. For example, the surviving spouse could not transfer trust payments to anyone else, including a new spouse.
- Generally, trusts do not become part of public record.
Sam and his attorney may decide a QTIP trust is the best option for providing for his current spouse and his children. In the event of Sam’s death, Emma will be provided for. His children will know that their inheritance is safe from Emma, her creditors, her future spouses, and her children.
What Will Be the Foundation of Your Estate Plan?
The attorneys at Virtus Law can discuss your options while helping you develop a complete estate plan. Contact Virtus Law at 612.888.1000 or send us an email at info@virtuslaw.com. Our main office is in Minneapolis, with other offices located in Maplewood, Cambridge, Edina, Mendota Heights, and Red Wing.