As is true throughout the country, families here in the Troy area come in all shapes and sizes. Trust lawyers need to be adept at understanding the complexities of all types of family situations so they can represent their client’s best interests and wishes. One way to do this for blended families is to create a QTIP Trust.
The “qualified terminable interest property trust” is very often used for those who are remarried with children from a previous relationship. The overall goal of this kind of trust is to provide for the current spouse while considering the needs of the children from an earlier relationship. As an added bonus, a QTIP Trust can also help to limit some tax burden.
How It Works – The Simple Version
In most cases, a person’s estate passes directly to his or her surviving spouse. In “traditional” families, this can be a great situation. However, in blended families, it is possible that the new spouse could very easily (and legally) spend all of that money without any of it going to the deceased’s children from a previous relationship. To add insult to injury, if that surviving spouse were to then pass away, the estate would then go to his or her biological children, leaving the other kids completely out in the cold.
A QTIP Trust takes advantage of the marital exemption by putting the assets into a trust and having the income from that trust designated for the spouse. However, once that spouse passes away, the assets within the trust then become the property of the children. When all is said and done, the decedent has been able to care for both the spouse and the children, all while limiting the tax burden for both. For these reasons, trust attorneys in Troy have found this to be a very useful tool in many situations.
Not Just for Those Who Remarry
While a QTIP is often used for those who have remarried, there are some good arguments to be made for its use with “intact” families. In this case, “intact” refers to those where the parents are still married to one another, and there are no children from other relationships. In these cases, a trust lawyer in Troy might still suggested a QTIP as a way to defer tax costs when they might create an undue burden for the surviving spouse. Taxes would still need to be paid once the second spouse passes away and would be the responsibility of the children who inherited the assets from the trust.
This type of set up can also help to protect the surviving spouse and his or her children from those who would prey on them. Unscrupulous individuals who would marry for money would be deterred by the knowledge that they would never be able to inherit the assets that were a part of the trust. Your trust lawyer in Troy can discuss the dangers of these types of predators and work with couples to protect against a situation where a grieving spouse is taken advantage of to the detriment of everyone involved.
Christopher J. Berry is a Michigan estate planning attorney and Medicaid planning lawyer dedicated to helping seniors, veterans and their families navigate the long-term care maze. To learn more visit http://www.michiganelderlawattorney.com/ or call 248.481.4000