Understanding a QTIP Trust as a Widow

I am a widow and was just told I am the beneficiary of a QTIP trust. What does this mean?

It means, you are probably a widow of a second marriage. This type of trust is designed to accomplish specific planning goals, such as:

• preserving assets for children from a previous marriage
• to help protect a widow’s financial future by providing lifetime income

Here are the three most common reasons why a Qualified Terminable Interest Property (QTIP) trust was chosen:

TO PROTECT CHILDREN OF A PRIOR MARRIAGE

QTIP trusts are typically used for protecting children of a prior marriage from the possibility of being cut off by the surviving stepparent spouse. These trusts also reduce the chance of the estate passing to a subsequent marriage partner or close friend of the surviving spouse.

Example: Rob set up a QTIP trust, naming his wife Jennifer as the life beneficiary and his daughters from a previous marriage as the final beneficiaries. Rob died first, leaving Jennifer a life estate in the assets that are left to the QTIP trust (their home and some investment accounts). She is paid the income the accounts produce, and has the right to live in the home. Jennifer can’t sell the trust assets, give them away, or leave them to someone else upon her death. At Jennifer’s death, the assets will pass to Rob’s daughters.

TO PROTECT A WIDOW FROM OTHER FAMILY MEMBERS

Before passing, a husband may have had worries about harmony in the family. Meaning, he was concerned about other family members (typically grown children – or their spouses) placing undue influence or pressure on a widow to change the ultimate disposition of family’s assets. With a QTIP, the trust ensures that the assets will pass to whoever was designated in the document, prior to his death, to receive the remaining assets.

PROTECTION FROM SCAMMERS AND OTHER INFLUENCES

Sometimes the surviving spouse might become vulnerable to bad financial advice, scammers, or be subjected to influence by other family members who have their own interests in mind (such as investing in a family member’s new business). The QTIP trust insulates a widow and the inheritance from bad actors by providing instructions to help protect the trust.

QTIP trusts are used for a variety of reasons – estate tax planning, asset protection for beneficiaries, and providing lifetime benefits to surviving spouses. If you are the beneficiary of such a trust, your husband has taken special care to provide for you and other heirs. Income, and sometimes principal, generated from the trust will be given to you to ensure that you are taken care of for the rest of your life.

The information contained in this blog is for general financial education and should not be construed as individual financial advice. Any opinions are those of Laura Amendola and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the developments referred to in this material. Raymond James does not offer legal advice. You should discuss any legal matters with the appropriate professional.

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