Even though many have unusual names, estate planning documents are important and beneficial tools. One such document is a QTIP Trust. Though it shares a name with cotton swabs, there are no other similarities between the two. If you’re going to start estate planning, understanding all your options is necessary to ensure you make the best decision possible. The following blog explores what you should know about these circumstances and why connecting with a Medina County, Ohio Trust preparation lawyer is in your best interest.
What Is a QTIP Trust?
A Qualified Terminable Interest Property Trust is a form of estate planning document that allows the creator to protect their spouse and Beneficiaries.
In many ways, these are similar to Marital Trusts. They both are Irrevocable Trusts that qualify for marital deductions, postpone estate taxes until the Beneficiary spouse passes, and only name the spouse as the Beneficiary. As such, you may be wondering why choosing a QTIP Trust is better. In general, these work well for those who are worried about the financial responsibility of the spouse upon their passing. This is because control of the Trust is not automatically transferred to the spouse upon the creator’s death.
What Are the Benefits?
As mentioned, one of the benefits of a QTIP Trust is that it provides a set amount of income for a spouse who may not have the financial responsibility to handle receiving a large lump sum of money at once.
Additionally, this protects those who have children from another marriage. This is because you can determine the amount of funds your spouse will receive as income while your children inherit the rest of the funds and assets from your estate. This allows you to care for both your spouse and children.
How Do I Establish One?
If interested in establishing a QTIP Trust, you should begin by establishing a Trustee. This is essentially the person who will manage and oversee your Trust on your behalf. Next, you will make the election on Form 706 to establish a QTIP Trust, as you’ll need to list all the assets placed in the Trust. Upon your passing, the Trustee is responsible for the final filing of your estate tax return.
In addition to making the election, you must ensure your spouse receives income at least once annually from the Trust. If the assets you’re including do not generate enough funds, your spouse can ask the Trustee to transform the assets into profitable assets to produce an income for them.
At Krause Law, we understand the complexities of these matters, which means our team will do everything possible to help ensure you understand your options throughout this complex process. We know you want to do everything possible to protect your family, and we will help provide you peace of mind. Contact us today to learn more.
