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BLENDED FAMILIES CAN BENEFIT FROM SPECIAL ESTATE PLANNING

Major life events require you to review and, if needed, revise your estate plan. One such event is getting married for the second (or later) time. Consider creating a qualified terminable interest property (QTIP) trust -- especially if you and your fiancé have children from previous marriages. Why? Financial issues between your future spouse and your children may arise after your death. Too often, in the case of a second (or later) marriage, there’s friction between children and the surviving spouse. A QTIP trust can alleviate that concern and, perhaps, help everyone to see that you have their best interests at heart.

Reasons to create a QTIP trust

A QTIP trust gives your spouse access to your assets after your death, but restricts his or her ability to direct how the assets remaining at his or her death will be distributed. A QTIP trust can be beneficial if you wish to provide for your current spouse while ensuring that your children from a prior marriage receive the assets you intend them to receive. With so many blended families today, this isn’t an unusual scenario.

Even if the relationship between your spouse and your children from your previous marriage is cordial, a QTIP trust may be warranted. After all, there’s the possibility that your spouse might unintentionally not make provisions to provide for your children in his or her own estate plan. Following your death, everything you’ve accumulated will pass to your spouse’s children on his or her death.

QTIP trust provisions

A QTIP trust has special provisions that provide for the benefit of your spouse after your death. The assets in the trust will qualify for the federal and state marital deduction and, thus, will not be subject to estate taxes at your death. Rather, they’ll be included in your spouse’s estate on his or her death. What’s left in the trust when your spouse dies will go to your children (or other beneficiaries you have named).

A QTIP trust must include the following provisions:

• All income from the trust must be payable to your surviving spouse for his or her lifetime on at least an annual basis,
• During your spouse’s lifetime, nobody can have the power to shift the trust assets to someone other than your spouse, and
• Your spouse must have the right to compel the trustee to invest the trust in income-producing assets.
• The QTIP trust treatment must be elected on your estate tax return; otherwise, it will not be considered to be a valid QTIP trust.

If you think you might benefit from a QTIP trust as part of your estate planning, please contact us for further information.

Powell Trachtman Logan Carrle & Lombardo, P.C.
610-354-9700
www.powelltrachtman.com