There are many different acronyms used in the field of estate planning to shorten somewhat wordy legal terms. One of them is QTIP, and it is something that sounds familiar, but most people have not heard it used in this context. In our area of the law, it stands for a qualified terminable interest property trust.
If you are getting remarried as a parent, you may have some estate planning concerns. This can be especially relevant if you have significant financial resources and you are quite a bit older than your prospective spouse. How do you adequately provide for your new partner in your estate plan without risking the inheritances that you would like to leave to your children?
One thing to take into consideration is the possible execution of a premarital agreement, especially if you live in a community property state. In these states, all of the property that is acquired by either person that is in a marriage is legally owned equally by both individuals.
New York is not a community property state, but this does not mean that a prenuptial agreement may not be useful for you and your spouse-to-be. It is simply a document that is constructed to protect the interests of both people as they are entering the marriage.
Clearly, no one thinks that they are going to get divorced when they are in love to the extent that they are willing to take marital vows. This being stated, more than half of the people who get remarried after having been married previously do in fact go through divorces at some point in time. You may defy the odds, but it may be wise to take the necessary precautions.
In any event, a qualified personal residence trust can be part of your estate plan if you are in this situation. The way that it works is you fund the trust, and you name a trustee to administer the trust after you are gone. Your spouse would be the first beneficiary and your children would be the final beneficiaries of the trust.
If you do in fact predecease your spouse, he or she would be able to use property that has been conveyed into the trust, like a home and its furnishings, motor vehicles, etc. The trustee could also distribute the earnings from the trust to the surviving spouse, and if you choose to do so, you could give the trustee the latitude to make discretionary distributions of the principal.
In this manner, your spouse would be able to live well with no disruptions to their lifestyle throughout the rest of their life. However, your surviving spouse would not be able to change the terms of the trust under any circumstances. After his or her death, the children would inherit the assets that remain in the qualified terminable interest property trust.
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