The Benefits Of A QTIP Trust

When you make an estate plan, you understandably want to take care of your spouse and ensure that he or she is provided for. But if you predecease your spouse, you cannot control what happens to your assets that you left to your surviving spouse, after he or she passes away.

You could leave property to your surviving spouse, but then she can leave that same property to her biological children, or her relatives, or to whomever she chooses to leave the property to.

Wouldn’t it be great if you could leave property to your spouse, but control who gets that property, when your spouse passes away? Perhaps, allowing your biological children from another marriage, to get that property?

Using the QTIP Trust

It turns out you can do just that, through what is known as a Qualified Terminable Interest trust, or QTIP trust.

A QTIP trust allows you to put assets in the trust, and leave those assets to whomever you choose—say, children from a prior marriage. However, the trust also says that your surviving spouse can use, or get benefits from, or profits from, the property in the trust, as long as he or she is alive. In fact, the law requires that to use a QTIP trust, a surviving spouse must get all income derived from assets placed in the trust.

In a simple example, you could put stock in the QTIP trust, and say that your sons will get and own those stocks. However your surviving spouse will get the dividends or payments that come from those stocks, during his or her lifetime. When the spouse passes away, the stocks will transfer into the name of the sons.

Using Property

The QTIP trust can not only provide for income for a surviving spouse from the assets in the trust, but can allow a surviving spouse to use property while he or she is alive. This can be useful if you want your spouse to be able to remain in a home, but you would prefer your biological children (or anybody else) actually inherit and own the home, when the spouse is gone.

Because you have said where the property in the QTIP trust goes when your surviving spouse passes away, your surviving spouse does not have the ability to control that property, distribute it, or leave it to her own heirs. This can also avoid the problem of a surviving spouse remarrying, and her new spouse inheriting property left to the surviving spouse, over your  biological children.

Setting Up the Trust

Like any trust, the QTIP trust must be drafted with instructions for the trustee, and a trustee must be designated. Because assets in the trust tend to be larger assets that yield income, you may want a professional trustee, like a financial advisor or wealth manager or other professional, to manage the assets.

What kind of trust is right for your needs? Ask us. Call the Torrance probate will and estate attorneys at Samuel Ford Law today.

Sources:

investopedia.com/terms/q/qtip.asp

nerdwallet.com/article/investing/estate-planning/qtip-trust