| Lots of trusts out there…
CLIENT QUESTION:
Is a Family Protection Trust similar to a QTIP that I’ve heard about? My wife and I have no children. If I predecease my wife, I want to ensure she is taken care of. But after her death, I’d want my assets (currently in my name) to go back to my family, and not her family. I heard that a QTIP can serve as a vehicle for this need.
MY RESPONSE:
My advice is not to get too worked up about the NAME of the trust. You are correct in that you need a trust to solve the problem. In your case, you need a trust that will provide for your wife during her life and then pass the assets on to your family at the time of her death. A QTIP trust is a trust that would do this although this trust is named after a tax concept.
A QTIP TRUST is a cute nickname for a QUALIFIED TERMINABLE INTEREST PROPERTY TRUST. A QTIP trust is actually designed to receive an estate tax marital deduction for all assets held in the trust for the benefit of a spouse. If assets pass directly to a spouse, there is no estate tax. If assets pass to a trust for a spouse then they would be subject to an estate tax unless it has certain language in it to make it tax-free…which a QTIP does. Of course, this tax goal is only important for taxable estates greater than $6.11 million in New York, which most are not.
In any event, A FAMILY PROTECTION TRUST is a different animal (designed to protect your estate from your children screwing it up), while a QTIP or other trust for your spouse is designed to protect your estate from your spouse screwing it up. 😊 This is a very common estate planning tool.
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