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San Diego Estate Planning and Tax Attorney

San Diego Estate Planning and Trust AttorneyWhat is a Qualified Terminable Interest Property or QTIP trust?  How is a QTIP trust a part of any estate plan or transactional planning process?

A QTIP trust is a unique estate planning tool for married couples.  The QTIP allows one spouse to distribute assets to the other while keeping options open for a marital tax deduction.

The QTIP provides protection for married spouses in the event of a death of one of the principles.  When the first spouse passes away, the surviving spouse is able to access the assets in the QTIP in order to receive income or other distributions.  The unique tax laws associated with QTIP trusts allow a surviving spouse to enjoy the benefits of the trust as long as they maintain a lifetime income from the QTIP.

A Qualified Terminable Interest Property or QTIP is an Irrevocable Trust

The Qualified Terminable Interest Property or QTIP trust is irrevocable.  It is generally used to ensure smooth transition of assets to a surviving spouse with the ultimate intention of passing remaining assets to heirs or beneficiaries.  Spouses are able to pass assets to one another without triggering federal gift taxation.

It is important to note that a spouse receiving an asset transfer through a QTIP cannot have an “income interest” in the QTIP or power over the appointment of the trustee or principal.

A QTIP Trust is Generally Part of a Well Structured Estate Plan

Generally speaking, the QTIP is established as part of a multi-trust strategy which provides maximum flexibility for the surviving spouse.  Many people prefer to hold some assets in a “revocable trust.”  A revocable trust allows the grantor to transfer assets into or out of the trust, while trust provisions may be altered or outright cancelled at any point if needed.

Estate Planning and Trust Attorney San DiegoHowever, a revocable trust has limitations from the perspective of taxation and wealth transfers.  It is common for an estate plan to establish an A-B trust along with a QTIP.  Upon the passing of a spouse the A-B trust may transition to two or three trusts:

  • One for the needs surviving spouse
  • Perhaps a second “family trust”
  • QTIP Trust

 
The goal of this strategy is to provide maximum flexibility and control for the surviving spouse while protecting assets from creditors and reducing or eliminating tax exposure.

In this structure the QTIP allows the surviving spouse to receive most or all of the benefits of marital assets and the income they generate.  When the surviving spouse ultimately passes, the QTIP passes to designated heirs and beneficiaries.

This is especially beneficial for blended families and planning for children of previous marriages.  The QTIP allows the surviving spouse to enjoy the maximum benefits of marital deductions under estate tax laws.  If the value of the estate exceeds estate tax limitations, it can still serve to defer payment of estate taxes until after the surviving spouse has passed.

Is a QTIP or QDOT Trust Appropriate for Your Unique Circumstances?

A QTIP is different from another common form of trust planning: the Qualified Domestic Trust or QDOT.  The QDOT is generally considered when one of the married spouses is not a United States Citizen.  The selection of appropriate trust strategy is part of the comprehensive transactional planning and estate planning services provided by Allen Barron.

Contact an Experienced San Diego Qualified Terminable Interest Property or QTIP Trust Estate Planning and Tax Attorney

Estate planning provides protection for individuals, spouses and their heirs and beneficiaries.  An effective estate plan should protect assets while shielding them as much as possible from taxation and creditors.  A comprehensive estate plan should also take into consideration business interests, transactional planning, liquidity, risk management, life insurance, charitable and philanthropic intentions, education, any special needs.

We invite you to review the strong recommendations of former clients and the legal industry and contact Janathan Allen and the experienced Allen Barron team or call today for a free consultation at 866-631-3470.

As an experienced tax, estate planning and business attorney Janathan Allen has the knowledge, skill and unique acumen necessary to approach the local, regional, national and international implications of your unique circumstances.

Contact Allen Barron's Experienced Tax, Legal and Accounting Team Today

Contact your single source tax, legal and accounting team to learn more about our integrated services,
or call us at 866-631-3470 for a free consultation.


16745 West Bernardo Drive, Suite 260
San Diego, CA 92137

Telephone: (866) 631-3470
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