A second marriage can be very exciting. Spouses may feel like they are on the road to a fresh start: A new relationship is blossoming later in life. It’s a time for love, change and potential adjustments. Despite the initial surge of anticipation, it’s normal for spouses to worry about what happens to their assets once they die.
Second marriages typically involve prior children. While many second marriages successfully blend the two families, estate planning is a whole different story. How can you make sure your children from the first marriage receive your assets?
There’s a trust for that
A QTIP trust, short for Qualified Terminable Interest Property, is often used in second marriages. This type of trust protects your children’s inheritance.
Your surviving spouse can receive all income from the trust. In addition, you can designate who gets the assets. There are many beneficial aspects to having a QTIP trust, such as:
- Controlling your property. As mentioned before, a QTIP trust allows you to essentially direct your property. There’s no need for your surviving spouse to receive everything. Your children from the previous marriage are promised the property you intended for them. Your former spouse can even receive property, if that’s what you want.
- Maximizing estate tax saving. Estate tax is continually changing. Your surviving spouse may find it beneficial to keep the assets in the trust. Therefore, your loved ones can save on estate tax by postponing it until your death. Assets in the QTIP qualify for unlimited marital deduction. This means all property passed to your spouse is free of estate tax.
It’s helpful for you and your spouse to discuss managing the QTIP assets. Your children are unable to make decisions for the trust, such as investment strategies. However, informing your children of what assets they will inherit can loosen feelings of tension. At the end of it all, it can give blended families peace of mind.