Married couples spend a lot of time planning for their future together. It is an exciting time thinking forward to building toward potential opportunities to achieve goals together. Estate planning should always be part of this planning process, including wills and trusts. There are many different types of tools that married couples can and should use to help make sure they are both protected in the event of the other’s death. One of these types of trusts is called a Qualified Terminable Interest Property Trust, often called a QTIP trust for short.
A QTIP trust is a useful tool to make sure that your spouse is provided for after your death. The trust allows you to place assets into a trust and your surviving spouse will receive the income generated from the trust during his or her lifetime. Then, after your surviving spouse passes away, the principal of the trust will be distributed in the way that you wish. QTIP trusts are especially popular for couples who have children from another relationship. The QTIP trust allows a spouse to provide for the surviving spouse during his or her lifetime while still passing on the assets that comprise the principal of the trust to his or her children. The principal of the trust never becomes the property of the surviving spouse. This means that the surviving spouse cannot pass on the principal to another new spouse or other children. Moreover, it means that a creditor of the surviving spouse cannot put a lien on the principal of the trust.
As with other trusts, a grantor must name at least one trustee to administer the QTIP trust. It is possible, however, to name more than one individual or organization to serve as trustee at the same time. The trustees will be responsible for controlling the principal of the trust and distributing the income to the surviving spouse. The amount the surviving spouse receives from the QTIP trust will depend on the income the trust is generating. Accordingly, it is important to select a savvy trustee who will wisely control the principal to maximize the income it generates.
Planning for the future of your family can take many different forms, but it always requires expert attention. Contact us today at (320) 299-4249 to talk about your future and what we can do to help your family after you are gone.