Qualified Terminable Interest Property (QTIP) trusts are useful estate planning documents that can solve a lot of the problems and friction that can develop within the family when a person marries for the second time. The QTIP trust allows a person to make sure that their children from a previous relationship do not get disinherited by the second spouse, but also make financial provisions for the second spouse.
The benefits of a QTIP trust in estate planning for second marriages include these points and others, but only if the trust document is drafted and funded correctly. The QTIP trust must comply with the current tax code provisions that govern these financial devices. A Texas estate planning attorney can make sure that your QTIP trust and other estate planning papers meet your needs and goals.
Prevent the “Wicked Stepparent” Syndrome
Children from a previous marriage often bitterly opposed their surviving parent’s pending marriage for several reasons. One of the most compelling objections is that the children fear the new spouse will get all of your assets if you die first, robbing them of their inheritance. Sadly, this adverse result can become a reality unless a parent enters into legal documents to prevent this outcome.
Also, if you marry someone who spends a great deal of money, your children might worry that there will be nothing left for them to inherit, even if the new spouse does not cut them off from the inheritance they expected to receive one day. The QTIP trust is an irrevocable trust that can minimize the resentment your children might initially have toward your new spouse.
Protect Your Spouse from Being Destitute When You Are Gone
Another benefit of QTIP trusts in second marriages is that they give the person setting up the trust (the grantor) the ability to continue to live in the marital residence and get some cash flow to live on if you die before they do. Otherwise, your children could demand access to your assets right away, and your second spouse could be out in the cold.
A QTIP Beats Merely Hoping for the Best
Many people procrastinate about drafting estate planning documents, especially in complicated situations like blended families. They try not to think about the future, and simply hope that everyone will treat each other fairly and kindly. Unfortunately, money can motivate people to do things they might not otherwise do.
If you want your wishes followed when you are no longer around to make that happen, you might want to consider using a QTIP trust when you marry for the second time.
Tax Advantages of QTIP Trusts
Your estate and gift tax liability can get reduced and delayed through the use of a QTIP trust. First, the unlimited marital deduction applies to QTIP trusts. Your estate’s assets will not get taxed until the surviving spouse dies. The assets will not be a part of that spouse’s estate, so the tax liability shifts to the trust beneficiaries. QTIP trusts can be highly advantageous, but they are sophisticated legal documents. You will want to talk to a Texas estate planning attorney about drafting a QTIP trust and your other estate planning papers. Reach out to our office today for help with your case.