In our last blog post, we began discussing some of the benefits of trusts. Specifically we discussed a credit-shelter or family trust and why this type of trust is often an attractive option for individuals who remarry and want to provide an income stream for a surviving spouse and also, eventually, their children from a previous marriage.
Another option for accomplishing these same goals, with more of an emphasis on providing for one’s children, is to use a qualified terminable interest property trust or QTIP trust. Using a QTIP trust, an individual establishes and funds a trust and interest accrued on a trust’s assets is paid to a widowed spouse. However, upon the widowed spouse’s death, the total amount of a trust’s assets passes to the trust creator’s children.
With a QTIP trust, the emphasis is on providing for one’s children from a first or previous marriage while also still providing a widowed spouse with some income stream. QTIP trusts are often especially attractive options for individuals of considerable wealth who are likely to leave additional assets to a surviving spouse and who can benefit from the tax-shelter advantages this type of trust provides.
As divorce and remarriage continue to change the landscape of today’s familial structure, parents would be wise to explore ways they can provide for both a surviving spouse and biological children. An attorney who handles estate planning and trust matters can assist in helping an individual review his or her options and accomplish unique and individual goals.
Source: Forbes, “Do You Need A Trust For Your Estate Plan?, “Do You Need a Trust For Your Estate Plan?,” Gary Plessel and Kevin Houser, May 14, 2015