There is a QTIP that is not for people needing to clean delicate areas. It is for those with a very different problem — those with the happy issue of expecting to leave substantial assets to heirs.

QTIP stands for Qualified Terminable Interest Property, and along with the bypass trust and the A/B trust, belongs to a category known as “marital trusts.”  These particular trusts have provisions to protect surviving spouses, provide surviving spouses and beneficiaries with regular trust income, and also offer federal tax-reducing benefits.

QTIP trusts offer flexibility in some circumstances, and restrictions in others. For example, an A/B trust allows the surviving spouse complete access to the assets that comprise the trust, but in a QTIP, the surviving spouse can’t access the “principal” of the trust, though he or she does receive payments from it.  This safeguards the trust assets from being completely removed.  When both spouses have died, the trust assets are then disseminated according to the trust creator, or settlor’s, directions, as established at the creation of the trust.

If this seems unnecessarily controlling, here’s a scenario to help make sense of it.  Suppose the settlor of the trust and his spouse were both married before, and each had children.  The QTIP prevents the surviving spouse from “emptying” the trust and giving the assets to his or her “previous” children, when the settlor had intended for the trust assets to pass eventually to his or her own children, not those of the spouse.

In terms of tax considerations, when the first spouse dies and assets are transferred into the QTIP trust, those assets may be tax exempt.  This would be addressed by the decedent’s Executor, upon filing the tax return for the decedent and the estate. It’s an option for the Executor, since tax rates, state laws, and estate sizes vary. The QTIP tax benefit might not be necessary.

That’s a lot of information to take in.  If you would like to know more about the benefits of marital trusts, or have any questions or concerns about estate planning-related matters, please give me a call.  We can set up a meeting to get all those questions answered. To schedule a consultation, please contact us at 818.956.9200.

Glendale Location

616 E. Glenoaks Boulevard, Suite 203

Glendale, CA 91207

Sherman Oaks Location

15303 Ventura Boulevard, Suite 900

Sherman Oaks, CA 91403