Estate Planning Attorneys Helping Divorcees with QTIP Trusts in the Sugar Land, Tx Area

A qualified terminable interest property (QTIP) trust is a flexible estate planning vehicle that allows the trust “grantor” to provide for a surviving spouse, yet maintain a significant measure of control over principal (and income) distributions, both during the life of the surviving spouse and at his or her death. The QTIP trust is one of the most commonly used estate planning tools for high net-worth individuals who have children from an earlier marriage. Properly drafted, the QTIP trust can allow the surviving spouse to continue his or her lifestyle and yet leave significant assets to children and grandchildren.

Advantages of a QTIP Trust

QTIP trusts offer a number of significant advantages, depending upon the person’s circumstances. They include:

  • Exclusion of assets from the surviving spouse’s probate estate
  • Protection from claims of the surviving spouse’s creditors (if carefully drawn)
  • Availability of “marital deduction” under Internal Revenue Code § 2056(b)(7) ensuring there are NO estate taxes at the first spouse’s death, REGARDLESS of the size of the estate
  • Flexibility in decision-making: Under appropriate circumstances, QTIP trust allows the executor of the first spouse to die to make decisions after that person’s death that are advantageous to the estate
  • Prevention of transfer of assets to the living spouse’s “new” spouse, should she or he remarry

Disadvantages of a QTIP Trust

Nothing in this world is free, including the creation of a QTIP trust. There are some limitations and/or disadvantages, including the following:

  • QTIP trust can cause—or exacerbate—tensions between the surviving spouse and the children or grandchildren who will inherit after the surviving spouse’s death.
  • Economic “pressure” on the surviving spouse: Depending upon the type of assets in the trust, they may not generate sufficient income to support the surviving spouse.
  • Some QTIP trust allow for withdrawal powers on the part of the surviving spouse. If the powers are too liberal, there may not be sufficient assets remaining in the trust to fulfill the long-term goals of the original grantor.
  • Inflexibility as to continued “gifting”: The typical narrow power of a surviving spouse to make withdrawals also means that spouse has limited ability to make gifts to the next generation, even in circumstances in which such gifts would fall beneath the annual exclusion for federal estate and gift taxation rules

QTIP Trusts: Somewhat Complicated, but Very Powerful

The proper crafting of a QTIP trust requires the careful weighing of multiple factors, together with skilled drafting of the required legal language to accomplish the goals of the original grantor. Careful thought must be given, so as not to run into complex Department of Treasury rules. QTIP trusts are not for everyone, but they can be extraordinarily powerful in some estate planning situations. It pays to retain a skilled estate planning attorney to maneuver through the maze of regulations.

Romano & Sumner: Skilled, Caring Legal Advisors

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The attorneys at Romano & Sumner have more than 20 years of combined experience providing expert legal assistance to clients in all types of estate planning issues, including those related to the creation of QTIP trusts. We have broad experience in helping you protect and preserve your hard-earned wealth. At Romano & Sumner, we provide customized service; we know that each situation is unique. We never use a cookie cutter approach. We listen before we suggest a solution to your needs and issues. We pride ourselves not only on our professionalism but upon our client service. We return phone calls within one business day. We keep clients informed. We complete the work within the allotted time frame. Call us at 281–242–0995 or complete our online contact form.