There is an ideal estate planning solution for every scenario that may exist. Life is not a cookie-cutter affair. People go through life changes, and these changes can require estate plan updates.
Various different strategies can be implemented depending on the circumstances. With this in mind, we would like to look at the estate planning device called a QTIP trust.
The acronym QTIP stands for “qualified terminable interest property.” A qualified terminable interest property trust can be used if you want to protect the interests of your children from a previous marriage after getting remarried.
Before we look at QTIP trusts, we should highlight the value of premarital agreements for those who are getting remarried. Statistics tell a very compelling tale, and you may want to take them to heart when you are getting ready to tie the knot for a second or third time.
The odds are against the success of these marriages. Most second marriages ultimately fail, and an even higher percentage of third marriages end in divorce. You may take a “this will never happen to me” stance, but most of these divorced people probably felt the same way when they were entering into their second or third marriages.
When you enter into a premarital agreement you can define your personal property as you enter the marriage. You are protecting yourself, but you are also protecting the interests of your children.
In the end, it is a personal decision, but you should certainly be aware of the facts so that you can make an informed choice.
You can make sure that you are providing for your surviving spouse while you simultaneously protect the interests of your children through the creation of a qualified terminable interest property trust.
When you draw up the trust agreement, you are going to make your spouse the initial beneficiary, and your children will be the successor beneficiaries.
If you die first, the trustee that you name in the trust agreement would be empowered to distribute earnings from the trust to your surviving spouse for the rest of his or her life.
However, the surviving spouse cannot change the terms of the trust. After the death of the surviving spouse, your children would inherit the assets that remain in the QTIP trust.
When you go this route, you ensure the financial well-being of your spouse, but you can also rest assured that your children will be receiving their inheritances after the death of your surviving spouse.
If you would like to learn more about QTIP trusts and other estate planning options, we can help. Our firm offers free consultations, and you can request an appointment through our contact page.
Parman & Easterday