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Inter Vivos QTIP Trust with Principal to Donor's Children on Spouse's...

Wake North Carolina Inter Vivos QTIP Trust with Principal to Donor's Children on Spouse's Death

Name: Wake North Carolina Inter Vivos QTIP Trust with Principal to Donor's Children on Spouse's Death
Brand: US Legal Forms
Rating: 4.56 (369 reviews)

Category:

Trusts - QTIP

State:

Multi-State

County:

Wake

Control #:

US-02630BG

Format:

Instant download

Description

A trust is a fiduciary relationship in which one party holds legal title to another's property for the benefit of a party who holds equitable title to the property. An inter vivos trust is a trust that becomes effective during the lifetime of the person creating the trust (the settler or trustor).

A qualified terminable interest property trust, often referred to as a "QTIP" trust, allows a bequest to a spouse in trust that, after a proper election by the beneficiary spouse, qualifies for the unlimited marital deduction:

" if the beneficiary spouse is entitled to all of the income from the trust property,
" if the income is payable annually or at more frequent intervals, and
" if no person, including the beneficiary spouse, has the power to appoint any part of the qualifying property to any person other than the beneficiary spouse during the beneficiary spouse's lifetime.

In order that the property transferred to a surviving spouse by means of an inter vivos marital deduction trust qualify for the marital deduction, the property must be includible in the trustor's gross estate for federal estate tax purpose.

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FAQ

The QTIP trust names his wife and his son as Co-Trustees. The Trust gives all the income earned therefrom to his wife, and also allows for principal distributions to her for her health, education, maintenance or support. Whatever is left in the trust at her death shall be distributed to his children.

The QTIP election is a common way to qualify property passing in trust from a decedent to a surviving spouse for the estate tax marital deduction.

In those cases, a simple 5 or 5 power, which allows the surviving spouse to distribute the greater of 5% or $5,000 of the marital trust to himself or herself, could be used, although any gift made under that power would incur a gift tax.

The answer lies in the use of a QTIP Trust. During the husband's lifetime, he can make unlimited marital gifts to his wife. If he makes them into a QTIP Trust, the assets are qualified for the marital deduction for gift and estate tax purposes.

When you set up a QTIP, you must name a trustee as well as beneficiaries. You can name your spouse to be the trustee, choose one of your adult children, or pick a disinterested third party.

Depending on the principal invasion standard and nature of assets in the trust, the surviving spouse may be able to act as her own trustee over the QTIP. There are a multitude of reasons why a QTIP trust may make sense for your estate plan.

If you create a QTIP trust, then at your death no estate tax is due on the assets that go into the trust. The assets qualify for the unlimited marital deduction, which lets all property, regardless of value, pass to a surviving spouse free of estate tax.

The QTIP trust terminates when the surviving spouse dies, and the assets are distributed to the final beneficiaries. The trust assets are counted as part of the gross estate of the surviving spouse and taxes must be paid if it is valued over the exemption limit.

You can also name your surviving spouse as a Trustee. However, keep in mind that will give them broad access to the assets in the Trust, which may defeat the purpose of setting up a QTIP at all.

More info

Surviving spouse to leave property equally among children). 19. Although a basic principle of trust law is impartiality between income beneficiaries.

Wake North Carolina Inter Vivos QTIP Trust with Principal to Donor's Children on Spouse's Death

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FAQ

Can a QTIP trust distribute principal?

Can surviving spouse make QTIP election?

Can you gift from a marital trust?

Can surviving spouse make gifts from QTIP trust?

Who can be trustee of QTIP?

Can surviving spouse be trustee of QTIP trust?

Is QTIP property included in surviving spouse's estate?

Is a QTIP trust included in the surviving spouse's estate?

Can a surviving spouse serve as trustee of a QTIP trust?

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