To provide an example, a husband dies and his assets pass into a Q-TIP trust. He has two children, both from a previous marriage. His wife and the eldest child from his previous marriage serve jointly as Co-Trustees. His wife receives all of the trust income tax free until her death, and has full usage rights to any real estate held in the trust. Furthermore, principle reductions may be agreed upon by the Co-Trustees for the surviving spouse’s health, property, education, maintenance or support. At the time of the spouse’s death, all trust assets automatically get distributed to the husband’s children. Only after the surviving spouse’s death are any estate taxes paid. These taxes are only paid on the remaining trust property and not retroactive to any assets or interest paid out from the trust during the surviving wife’s lifetime.
Q-TIP trusts can be quite complicated. If you are considering one, you will definitely want to employ an estate attorney who has ample experience with these types of trusts. Contact us, and let’s discuss the best estate planning tools for you and your family.