Marital Trusts and Qualified Terminable Interest Property Trusts in Estate Planning
When it comes to estate planning, two of the most popular types of trusts that individuals and couples rely on are known as the Marital Trust and the Qualified Terminable Interest Property (QTIP). Both of these options allow clients to mitigate tax burdens by keeping in place the tax exemption to be used by the beneficiary or trust beneficiaries. In other words, both of these options operate as “credit shelters.” However, they are also very different from each other. Below, we discuss some of these key differences:
What Is The Difference? How Do I Choose?
There are some key differences between a Marital Trust and QTIP Trusts; for example, with QTIP Trusts:
- The trust is set in motion when a spouse passes away, and the surviving spouse is able to use these assets;
- The original beneficiaries of the assets take on whatever remaining assets are in the trust;
- These beneficiaries are also able to make use of the principal investments;
- Estate taxes are put off until the surviving spouse passes away, meaning that the trust recipients don’t have to pay taxes on it; and
- Q TIPs are also able to protect trust assets in the event of a spouse who perhaps isn’t as financially responsible as the donor would like by securing the assets for any eventual beneficiaries, such as children and grandchildren, by placing the assets within something akin to an irrevocable trust structured such that, upon the death of the spouse, the assets and any income that they have generated are transferred to the beneficiaries.
Conversely, with Marital Trusts:
- The donor usually wants some assets appropriated to the spouse and others for the beneficiaries;
- When the donor dies, the estate is split and the assets are allocated separately then, whereby the first group is placed into a trust fund and the second group is transferred to the surviving spouse;
- The estate taxes do not need to be paid at this time;
- Like Q TIPs, the spouse may be able to use the trust fund’s principal right away, or leave it in the trust in order to increase interest as time passes, while also deciding on the ultimate beneficiaries; and
- Unlike Q TIPs, the surviving spouse does not have to take annual allotments.
Note that both QTIPs and Marital Trusts are only available to U.S. citizens who are married, while different trusts are available for individuals involved in domestic partnerships, for example.
Contact Our Florida Estate Planning Attorneys to Find Out More
As Florida attorneys who have helped a number of clients with estate planning and choosing what plans are best for themselves and their families, we can provide you with that same kind of advice and counseling for your future. Contact us today at Gierach and Gierach, P.A. for a free consultation to find out more.