Qualified Terminable Interest Property (QTIP) Trust

A Qualified Terminable Interest Property Trust, or QTIP Trust, is a type of irrevocable trust. It allows you to provide for your surviving spouse while still providing for secondary beneficiaries, such as children from a previous relationship. In this article, we will go over the basics of how a QTIP works.

Income Provisions

When you set up a QTIP you need to name a trustee to care for the distributions. This can be your surviving spouse, financial institutions, family member or friend. This person will be responsible for the management of assets and distributions. Once you pass, your surviving spouse will receive payments based on the income the trust generates. They work like a stock dividend would. If you choose, you can also give them the ability to make distributions from the principal of the trust.

Death of a Surviving Spouse

At the death of the surviving spouse payments stop, as they are not transferable. Then the secondary beneficiaries will receive their share of the remaining principal. The secondary beneficiaries are usually children from a previous marriage. QTIPs allow you to provide for both a surviving spouse and children. It prevents the surviving spouse from disinheriting your children or passing your assets on to a new spouse.

Benefits

These are a couple of benefits to setting up a QTIP Trust. First, it allows you to control where your assets ultimately end up. No matter what your surviving spouse does or wishes, your assets will only pass to secondary beneficiaries that you name. Second, it protects assets and income from the actions of the surviving spouse. By putting your wishes into writing in advance you prevent the misuse of your assets.

Setting Up a QTIP Trust

If you feel like a QTIP Trust will work good for your situation, meet with a qualified estate planner who can help you set up the documents.

Questions? Want to schedule an appointment? Contact us by clicking here.