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The name "Q-Tip Trust" is short for "Qualified Terminable Interest Property Trust." The Q-Tip trust helps married couples take advantage of the allowed marital deduction while still maintaining control over how their assets are distributed once their surviving spouse passes. Typically, property or assets that are given to a spouse are exempt from estate taxes due to a credit against gift or estate taxes (the "marital deduction"). The spouse that receives the assets or property, however, must be given full ownership of the gift or estate. Otherwise, any gifts or estate property passed down to other family members (such as sons or daughters) will be subject to estate tax. The Q-Tip trust is a way to bypass this situation. It allows for an individual to place property or assets into the trust, which would then go to his or her surviving spouse after his or her death. The estate would pass to the surviving spouse (the living beneficiary) tax-free because of the marital deduction, and then the surviving spouse would pass the estate on to the named beneficiary of the decedent spouse (the final beneficiary) as originally intended once that surviving spouse dies. The Q-Tip trust is common amongst couples with children from previous marriages.
Q-Tip trusts are generally used to delay or diminish estate taxes and the IRS has very strict rules about these documents. Any small error could make the Q-Tip trust invalid, which would lead to estate taxes for your beneficiaries. In addition, tax laws are constantly changing, thus there is no guarantee that there will be tax benefits if using a Q-Tip trust, and they are quite expensive and complicated to create. If your spouse has chosen to create a Q-Tip trust, you will not be able to sell any of the estate in the trust after your spouse passes away. This could be an issue for some.
It is highly recommended that an estate planning attorney help you put together a Q-Tip trust. If you are unsure about whether or not this type of trust would benefit you and your family, an estate planning attorney can help you. If you decide to create a Q-Tip trust, an estate planning attorney will help you and your spouse understand all of the strict rules associated with this trust and they will help you to create the trust as quickly and as cost efficiently as possible. If you need help understanding or administering a Q-Tip trust after your spouse dies, an experienced estate administration attorney can help guide you.
If you are considering creating a Q-Tip Trust for you and your spouse, contact Attorney Search Network. We can help refer you to the right estate planning lawyer in your area.
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