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What is a Q-Tip Trust, and Does it Make Sense for Your Family?

ESTATE PLANNING Attorney, NONPROFIT, BROWARD, MIAMI Corporate, Business ATTORNEY, > Estate Planning  > What is a Q-Tip Trust, and Does it Make Sense for Your Family?

— What is a Q-Tip Trust, and Does it Make Sense for Your Family?

Lawyers love a good abbreviation. The Q-Tip or “Qualified Terminable Interest Trust” is a tool that Florida estate planning lawyers can deploy when trying to protect the long-term growth of a family’s estate. In general, under a Q-Tip Trust, when one spouse passes away, his or her trust assets remain invested, while the income from the trust is payable to the surviving spouse for the remainder of that person’s life. After the second spouse passes away, the remaining funds are distributed to other heirs as indicated in the trust. One may read this and think it is too simple. After all, why could someone just not leave their assets to their spouse? The Q-Tip trust is a clever tool, but the devil is in the details.

Three Times a Q-Tip Trust Make Sense

There are basically three scenarios in which a family might consider this tool. Each has a unique problem to be avoided.

  • Avoiding Taxes – Income held in the trust and paid to the surviving spouse is not taxed as part of the decedent’s estate. Therefore, if the family has a very high net worth (north of the $23.6 million amount needed before the estate tax applies, per 2020 IRS rules), this could be very handy.
  • Avoiding Debts – Where one spouse has massive debts that could easily eat up the value of an inheritance for the other heirs, a Q-Tip trust might be an option, as it allows income to be paid to the surviving spouse, without creating a windfall that could be subject to collections or bankruptcy proceedings. Once the surviving spouse passes away, those funds are preserved for other heirs, such as children and grandchildren.
  • Protecting Children from Earlier Marriages – Perhaps the most common use is in situations where there are adult children from a prior marriage. A late in life marriage may mean that a person wants to provide for their spouse as long as that person survives them, but once that spouse passes away, they would prefer the balance of funds to go to their own children. But if funds went straight to the surviving spouse, that person could choose to create a new plan, giving his or her own children and heirs a windfall. The Q-Tip trust works to ensure that while income is payable to the surviving spouse, the balance is maintained and preserved for the intended heirs.

Fort Lauderdale Estate Planning Attorneys

Now, more than ever, people are discovering the value of advanced planning for final affairs. For those who are seeking maximum protections against lost inheritance or tax protections, a solid attorney-drafted trust is one of the most valuable tools you can have. It may not always be right for every family, but when necessary, options like the Q-Tip trust can be a saving grace. For help preparing your final plan, call or visit online to learn why families all over south Florida turn to the Sejour-Gustave Law Firm, PLLC to protect their futures.

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