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Heritage Tree LogoWhat Is a QTIP Trust and Who Should Consider One?

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A qualified terminable interest property (QTIP) trust is one of the several irrevocable trusts that you may incorporate into your estate plan in the state of Pennsylvania. This type of trust is especially worth considering if you are married and thereby wish for your spouse to be financially taken care of in the unfortunate event that you pass away first. Follow along to find out how a QTIP trust works and how one of the proficient Butler County trust attorneys at Heritage Elder Law & Estate Planning, LLC can help you consider whether you are the right fit for one.

What is the purpose and function of a QTIP trust?

Firstly, a QTIP trust allows you (i.e., the grantor) to leave your assets to your surviving spouse in the unfortunate event of your passing. In turn, it enables you to control how these assets are distributed once your surviving spouse, unfortunately, passes away.

Secondly, the way this works is that your surviving spouse will receive income payments from this trust fund. Then, at the time of your surviving spouse’s passing, the remaining balance in this trust fund will be paid to your designated beneficiaries. Such beneficiaries could be your children, grandchildren, or any other loved one you wish to receive financial support when you are no longer around to take care of them yourself.

Who should consider establishing a QTIP trust?

To reiterate, a QTIP trust is worth considering if you are involved in a marriage in the later stages of your life. However, more specifically, it may be particularly beneficial if you were married before this current relationship, and thereby have potential beneficiaries from your previous marriage. For example, you may want the remaining balance in this trust fund to go to your children from your first marriage, rather than your stepchildren from your current marriage.

A QTIP trust may also be beneficial because the income payments to your surviving spouse may qualify for marital deductions. In other words, the funds within this trust may not be subject to death taxes upon your passing. Rather, this tax is deferred, thereby making these funds taxable upon your surviving spouse’s passing.

Lastly, you may be interested to know that control over your QTIP trust does not transfer to your surviving spouse once you have passed on. Meaning, your disclosed orders are set in stone. For example, your surviving spouse cannot share their income payments with their new spouse upon remarrying. Or, your surviving spouse cannot reassign beneficiaries to receive the remaining balance once they have passed on.

At the end of the day, your establishing a QTIP trust requires one of the talented Butler County estate planning attorneys in your corner. So please get in touch with us at Heritage Elder Law & Estate Planning, LLC.

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