One of the most basic tax-planning devices is the unlimited marital deduction. It allows one spouse to pass his or her entire estate, regardless of size, to the other — and not pay federal estate taxes. No matter how large the estate, no taxes are due where it is passed to the spouse.
Married people planning their estate often create marital trusts, which are used to allow the surviving spouse to take advantage of the unlimited marital deductions of estate tax, while allowing him or her to have control over the property.
There is one type of marital trust that is of particular interest. It is called a Q-TIP trust, which stands for qualified terminable interest property.
In a Q-TIP trust, all of the income from the trust is paid to the spouse. However, the surviving spouse does not have to be given the power to appoint trust funds to him or herself or his or her estate. The trust funds thus pass directly to specified beneficiaries.
What all that means is that if you don't trust the surviving spouse to do what you intended, you can put a Q-TIP trust in place.
The QTIP trust is especially favored for people who want to make sure their children aren't slighted if their spouse remarries or has her own children or other beneficiaries whom she prefers.
For more information on how to do a Q-TIP trust in New York, please contact an attorney. And if your spouse is not aware that you are going to be making such a trust, then it is best to have that conversation first.
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