When modifying your estate plan after a second marriage, you may find yourself considering the needs of your surviving spouse and the needs of children from a former marriage. Amending your estate plan is important in order to accommodate these significant changes to your family’s circumstances. In some cases, you may wish to consider incorporating a Qualified Terminable Interest Property (QTIP) trust.
5 Requirements for Using a QTIP Trust
A QTIP trust allows you to leave the income from your trust assets, along with use of the marital home or other real estate, for the benefit of your surviving spouse. Once your spouse dies, ownership of these assets passes to your children. QTIP trusts can prevent worry or concern on the part of your children and spouse about whether or not they will be taken care of after you die. To be eligible for using a QTIP trust, you must meet the following criteria:
- Your marriage must be recognized under federal law.
- Your surviving spouse must receive a lifetime interest in the income generated by the trust’s assets. He or she must receive this income at least annually. Your surviving spouse can be given trust principal by the trustee but only to care for your spouse using a defined standard of living. A commonly used standard is your spouse’s health, education, maintenance, and support.
- You must give the executor or personal representative of your estate the authority to make the appropriate QTIP election at the time of your death.
- While your surviving spouse is alive, he or she can be the only lifetime beneficiary of the trust assets.
- Your surviving spouse must be a citizen of the United States.
QTIP trusts offer many advantages to some families when it comes to their estate plan. It is important, however, to consult with an attorney to determine if this type of trust is right for your needs.