Trusts are common and useful vehicles for those doing their estate planning. But there are different types of trusts and that can confuse people because they may not even know the right questions to ask.
Complex situations involving multiple spouses and children from prior relationships often are ideal for a specific type of trust detailed below.
What is a QTIP trust?
The acronym stands for Qualified Terminable Interest Property trusts. They are ideal for blended families because this kind of trust allows the trust grantor’s spouse to derive income from the estate and provide them with use of the property and other resources. But, upon that spouse’s demise, the assets then revert back to the trust grantor’s other heirs and beneficiaries.
A QTIP trust prevents step-children or other heirs from evicting grieving spouses and denying them a wage to live on while still preventing anyone but the trust grantor’s beneficiaries and heirs from winding up with their relative’s assets. They also aren’t subject to estate taxes in most cases, and when they are, the taxes are reduced.
Are there negatives to QTIP trusts?
As with most estate-planning options, there are reasons why QTIP trusts might not be for everyone. Probably the top reason not to use one is that they are irrevocable trusts. Once they are funded, the trust can’t be altered or the funding moved.
How to make the right choices for your estate plan
First, relax. Nobody expects you to know everything about your estate planning options. Gathering information and learning more about the options that best fit your unique circumstances is always a good move.
