As life goes on, family circumstances often change. For some families, this may mean a divorce and an eventual remarriage. Both divorce and a second marriage are prime reasons for updating an existing estate plan. In second marriage situations in particular, there may be an added concern about providing for both the surviving spouse and the children from a previous marriage. Balancing these two priorities during estate planning can sometimes be difficult. Some couples may want to consider amending their estate plan to include the use of Qualified Terminable Interest Property Trusts, or QTIP trusts.
The QTIP Trust Explained in 4 Steps
QTIP trusts are often useful because they allow you to leave some benefits to your surviving spouse while ultimately taking care of your children from a previous marriage. How do these trusts work? The following is a simplified overview:
- Each spouse in a second marriage will set up a QTIP trust, each leaving assets to the other to be held in trust.
- When the first person dies, the survivor receives the income produced by the assets left to the QTIP trust, as well as the use of any real estate for the duration of the survivor’s life.
- The surviving spouse is not able to sell these assets nor can they be given away.
- When the surviving spouse dies, the assets of the trust go to the beneficiaries named in the trust. This may include the children from the first spouse’s previous marriage. These “final” beneficiaries have full ownership of the trust assets.
There are many critical decisions to make when setting up a QTIP trust, and it’s important to get guidance from a knowledgeable and an experienced legal professional. We have helped countless clients create estate plans that were right for their needs. We encourage you to check out the positive feedback we have received from our former clients on our client testimonials page today.