The trust must contain language to the effect that the marital trust terminates on the death of your spouse. The QTIP trust pays an income to the surviving spouse who may also use some of the trust assets for their own benefit, but the trust assets are inherited by someone else of your choosing, like your child from a previous marriage by James F. Roberts | Second Marriages, Update a Trust. That history often includes children from the first marriage. essentially a legal entity that holds and manages the assets of one person for the benefit of another Your spouse having only half the assets available to them that they had before your death could cause their standard of living to take a serious blow. A QTIP trust is often used to take advantage of that “marital deduction”, yet still control the ultimate distribution of the assets to a third party at the death of the surviving spouse. Why consider amending your existing trust or existing estate plan to include a QTIP trust or QTIP provisions? Update Your Estate Plan By Funding Your Trust With New Assets, An Ex-Spouse as an Executor? With recent changes in federal tax law, far fewer people are subject to estate tax, so this is is not as significant a benefit as it once was. Learn how smart estate planning can reduce complications and restore harmony in your second family. It can prevent unintended outcomes in the event of your remarriage and subsequent death. A QTIP, or Qualified Terminable Interest Property trust, is authorized by language in Internal Revenue Code Sections 2056(b)(7) and 2523(f). We know that in this time, more than ever, it is important to have peace of mind about your estate planning. Copyright © 2021 A QTIP trust may be the solution. While we are not in the office, we are still here to answer your questions, conducting consultations for review, and initial appointments by phone and email during normal business hours. If a QTIP trust is ideal, an attorney who concentrates their practice in this area will be able to draft the trust documents so that your aims are accomplished. While QTIP trusts may be beneficial for many families, they are not necessarily the perfect choice for everyone. Second marriages can open a new and joyful chapter in life, especially after a bitter divorce or the pain of a first spouse’s death. For example, a husband sets up a QTIP trust to provide income for his second wife when he dies. A QTIP trust can help make it clear to children from a previous marriage that their inheritance will be protected. A living trust is a particularly good vehicle for making sure that each spouse’s respective property is passed on to his or her own children. The words “properly drafted” are key: if the document creating the QTIP trust does not contain the language required by the law, it may not have the effect you intend. Even if your new spouse has an excellent relationship with your children, you cannot predict what will occur after your death. Diane’s children may not feel as stressed by her second marriage if they know their mother has provided for them. Imagine this (unfortunately common scenario): your first spouse dies after your children are grown. The remainder of the What Coronavirus Means For Your Estate Plan, Law Firm Website Design by The Modern Firm. One potential solution may be to add a Qualified Terminable Interest Property trust, or QTIP trust, to your estate plan. Gudorf Law Group LLC. The husband names the children from his first marriage as beneficiaries. Similarly, a QTIP trust can help alleviate a new spouse’s concerns about receiving assets in the event of your death. A second marriage is more likely to succeed, if the couple addresses key questions in advance, especially those concerning finances. Many married couples have estate plans that make use of a QTIP Trust after the death of one spouse using the so-called “AB Trust” strategy. With the AB Trust strategy, if Sue dies first, the B Trust Unlike a first marriage, in which your whole future lies ahead, by the time you arrive at the threshold of your second marriage, you have some history. Family tension often arises as a result of a death. These blended families can pose some challenging estate planning issues for the newlyweds. Under a QTIP trust, the donor is able to take care of their current spouse's financial needs for the remainder of their life, while at the same time ensuring that their children's inheritance is secure. John and Mary have entered their marriage with relatively equal assets, but each of them has children by a prior marriage. The assets qualify for the unlimited marital deduction, which lets all property pass to a surviving spouse free of estate tax. This tension might negatively influence your new spouse’s decision making about the distribution of assets to children from a previous marriage. To address the concerns of both second spouses and children from a previous relationship, it is important to update your estate plan after a remarriage. Why Use QTIP Trusts. Second marriages can open a new and joyful chapter in life, especially after a bitter divorce or the pain of a first spouse’s death. Your children are an important part of your life, and you want to continue planning for their futures, even as you embark on your own with a new spouse. How Much Does it Cost to Make a Will? In this day and age, it is not uncommon to remarry after a divorce or the death of a spouse. Commonly, the final beneficiaries are children from the other spouse’s previous marriage. 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