QTIP Trusts

By Dan Hughes

If you are married and have kids, it is generally a good thing to begin right away at looking into estate planning. There would be nothing worse than to leave your children with nothing if something were to happen to your wife/husband and you. Generally, couples who do not know much on the subject, might just draw up a normal will and believe that this is completely protecting their children and be the most beneficial to all. However, this may not be the case.

There are often times that couples have different beneficiaries for certain things that they own. In this case, something that couples can do is to create a QTIP trust. A QTIP trust, for the purpose of taxes, means that the value of the QTIP trust's assets goes into your spouse's estate, not yours, even though you designate who gets the trust's assets. The benefit is that you can leave more than $3.5 million in the trust and it will not be taxed on until your spouse dies. However, depending upon the situation, your spouse must get the income from the trust as long as he/she is living.

While the trust may not be taxed, it does not mean that it will never be taxed. If the value of the trust property increases significantly in value, more estate tax could be due than if the property had simply been included in the estate of the spouse who was first to die. Also to be noted, even though the trust is set up as a QTIP trust, it is the decision of the executor to determine whether all, some, or none of the trust operates as a QTIP. 

http://www.smartmoney.com/personal-finance/estate-planning/youve-gotta-start-somewhere-7997/

http://www.finweb.com/financial-planning/qtip-trusts.html

http://www.investorguide.com/igu-article-200-thinking-through-a-qtip-trust.html