Not Just for Rockefellers

Six trusts to consider for your estate plan

that don’t go into a family trust can go into a trust for the surviving spouse. Any asset amount can go into such a trust, free of estate tax.

  • QTIP (qualified terminable interest property) trust. This is a special type of marital trust. After the death of the first spouse, assets going into a QTIP trust can only be distributed to the surviving spouse, who gets all the trust income. Therefore, no estate tax is due on QTIP assets at that time. At the death of the second spouse, estate tax may be owed. However, any assets left in the QTIP trust go to a beneficiary named by the first spouse to die. Thus, QTIP trusts are especially popular among remarried couples. James Smith, as we’ll call him, can provide for his second wife, Denise, via a QTIP trust; but James can stipulate that the trust fund eventually will go to his children from his first marriage, not to Denise’s kids or to her annoying younger brother.
    The following list of conditions may help you determine if a trust would be right for you.

    1. You have sizable assets.
    2. You want your estate to be payable to your heirs upon their meeting certain conditions, such as graduating from college, not necessarily immediately after your death.
    3. You have a disabled relative you would like to provide for without disqualifying that person from Medicaid or Medicare.
    4. You want to reduce estate and gift taxes.
    5. You want to protect your assets from creditors and lawsuits.
    6. You’d like to ensure that the principal or remainder of your estate goes to your children or other heirs after your spouse dies.
    7. You’d like to maximize estate tax exemptions for yourself and your spouse.
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