5 Advantages of a QTIP Trust

A qualified terminable interest property trust, or QTIP trust, is an estate planning tool that is commonly used in order to have more control over the way that property is distributed after death. Here are some of the advantages of using a QTIP trust.

1. Control of Distribution of Property

If you are the first spouse to die in a couple, you will be able to have some control over the distribution of property in your estate. At that point, the executor of your estate is going to be able to make decisions as to where the property should go. Part of your assets can go into the marital portion of the estate, while the other assets will go into the trust.

This can be very beneficial if you have children from a previous marriage. With this type of trust, you will be able to designate a certain portion of your estate to the children from your previous marriage. Your current spouse will not be able to have any control over the assets that you designate for your children.

2. Broad Use of Marital Deduction

When you pass away, you will be able to pass assets onto your spouse without paying any estate taxes on them. With the use of the QTIP trust, you will be able to pass as much as you want on to your spouse and then put a certain sum of assets into the trust. With this technique, you will be able to avoid paying estate taxes on the property that you pass on to your heirs.

3. Avoiding Probate

With the QTIP trust, your family will be able to avoid probate. None of the assets that you put into the trust have to go through probate before they can be distributed. This means that your family is going to be able to take advantage of a much simpler process than if they would have had to go to court. They can also potentially save a larger percentage of the estate because they will not have to pay for legal costs and other costs that are incurred during the probate process.

4. Postmortem Elections

Another big advantage of the QTIP trust is that postmortem elections are allowed. In many cases, you have to decide in advance what types of assets you want to include in a trust before you die. With the QTIP trust, this is not the case. You can simply choose your executor for the trust, and then he or she will be able to decide what assets go into the trust after you die. This allows the executor to analyze the situation and determine what would be most beneficial for your beneficiaries. This way, he or she can avoid as much of the estate tax as possible.

5. Convenience

This type of trust is going to be one of the easier ones to set up initially. Since you do not have to make all the decisions up front, you can simply choose your executor and provide him or her with some basic guidelines.

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