There are many different family scenarios that can call for the utilization of specific estate planning tools. You should always assume that you can find a solution if you work with an attorney to develop a custom crafted plan that is adapted to suit your needs.
One of these situations is the remarriage equation. If you are getting remarried as a parent with significant resources, you may have concerns.
This is understandable, and there is a tool that is ideal for people who want to cover all their bases effectively.
Qualified Terminable Interest Property Trust
The qualified terminable interest property (QTIP) trust can be the ideal tool to use under these circumstances. If you create the trust, you would be the grantor, and your surviving spouse would be the first beneficiary of the trust.
Your children would be the successors who will inherit the resources after the passing of your spouse if you do in fact die first. The other participant is the trustee, who will act as the trust administrator.
Who can act as the trustee? Any competent adult that is willing to assume the role can serve as the trustee, but there is a consideration. The trust is going to benefit the surviving spouse and the children, and the two parties can have competing interests in some instances.
Given this dynamic, you have to consider the relationships that family members and friends have with your children and your spouse. If you do not know anyone who would be suitable, or if you simply want to use a professional money manager, this is an option.
Trust companies and the trust departments of banks provide trustee services for a fee. You avoid conflicts of interest, and you also maximize the assets in the trust because the resources would be managed by a qualified professional. Longevity would be no factor, and this is another benefit.
Assuming you predecease your spouse, they would receive distributions of the trust’s earnings for as long as they live. You can allow for distributions of portions of the principal under certain circumstances if you choose to do so.
Your surviving spouse could utilize property that is technically owned by the trust. For example, if you own a home and a vacation house, you could convey them into the trust, and your spouse could use the properties as they see fit.
A comfortable lifestyle would be facilitated, but the surviving spouse would have no legal right to change the terms of the trust in any way. After they are gone, your children would inherit the assets that remain in the trust.
An Added Consideration
If you implement this strategy, there is no getting around the fact that your children would have a vested interest in your spouse’s death. This is not to say that they would want it to happen, but it is the proverbial elephant in the room.
You can address this in advance in a simple manner. When you are creating your estate plan, you can work with your attorney to make sure that your children receive a portion of their inheritance shortly after your passing, rather than waiting for the death of your spouse.
Ready to Take Action?
Learning is great, but at some point, it is time to work with an attorney to develop a personalized plan that is right for you and your family. If that time is now, our doors are open.
You can schedule a consultation at our Naperville, IL estate planning office if you call us at 630-568-8611, and our North Aurora location is opening soon. If you would rather send us a message, fill out our contact form and we will get back in touch with you promptly.
- It’s Better to Give Than to Receive - May 3, 2022
- The Foundation of an Estate Plan - May 1, 2022
- What Everyone Should Know about the New FDIC Regulations - April 28, 2022
