Many kinds of trusts can be used to protect your assets. A Washtenaw County trusts attorney from our firm can guide you through the estate planning process and help you find an arrangement that works best for you. One good option might be a QTIP trust, which allows you to protect all of your assets while ensuring that your spouse will not be left to fend for themselves.
How Does a QTIP Trust Work?
A QTIP trust goes into effect once you pass away. It can begin distributing income to your surviving spouse, ensuring that they can continue to pay their bills and living expenses now that you are gone. Your assets are all placed in this trust, but no one can withdraw everything or change the rules that you have set for it.
Once your spouse passes away, everything in the trust is distributed to the other beneficiaries that you have chosen. So this trust allows you to make sure that your spouse is still cared for after you are gone while giving you the opportunity to pass on assets to your children, grandchildren, and other loved ones.
What is the Difference Between a QTIP Trust and a Marital Trust?
A marital trust distributes assets as soon as one spouse passes away. Everything gets split up, with the surviving spouse and other beneficiaries getting everything that they were entitled to right away. A QTIP trust can begin distributing income to the surviving spouse once one spouse dies, but it does not give everyone the assets they are entitled to until both the grantor of the trust and their spouse have passed on.
Who Should I Choose as a Trustee?
We recommend choosing a family member or trusted third party, like an attorney, as a trustee. We do not recommend choosing your spouse though. While a spouse can be a good trustee in other situations, they may not be the best fit for a QTIP trust. Your other beneficiaries could have issues with them being put in charge of managing the trust, so it is better to avoid any unnecessary discord.
Are There Special Tax Considerations to Be Aware Of?
A QTIP trust can help you reduce your estate tax burden, if your estate is valuable enough to meet the threshold for the estate tax. The income your spouse receives from the trust qualifies as a marital deduction, so they are not going to be hit with some sudden expensive tax bills. It’s still a good idea to keep records of everything though, and it’s wise to have a knowledgeable accountant around who can make sure that any complications or errors are avoided.
Talk to an Estate Planning Lawyer
If you are ready to learn more about trusts and other estate planning options, contact Collis, Griffor & Hendra. Schedule an appointment and we will take the time to help you make a comprehensive estate plan that protects your assets and beneficiaries.