According to federal tax law, when your spouse dies you can receive bequests without paying any estate tax. This is called a marital deduction. However, North Palm Beach estate planning lawyer warns that if you transfer this property to your children down the road, they can be hit with estate taxes.
Property from your spouse can be appropriated to you via a trust, as well as by an outright gift or bequest. Therefore, North Palm Beach estate planning attorney can set up a trust for you that will adhere to the marital deduction guidelines so you do not need to worry about estate taxes.
There are two different types of marital trusts:
- GPOA – The general power of appointment trust; and
- QTIP – The qualified terminable interest trust.
When dealing with a general power of appointment trust, a North Palm Beach estate planning lawyer wants you to know that the entire trust will be included in the surviving spouse’s estate.
In the case of a QTIP trust, your property can qualify for the marital deduction without you needing to have power of appointment. Therefore, you would not have a lifetime power to appoint trust property anyone other than yourself.
According to a North Palm Beach estate planning lawyer, this is how a QTIP trust works. You will receive income from the assets of the trust for the rest of your life. However, the handling of the trust is left to someone else, usually your children or someone close who you trust. All this time the trust takes advantage of the marital deduction while still providing you with an income.
Are there any disadvantages to a QTIP Trust? North Palm Beach estate planning attorneys believe that the primary disadvantage is that conflicts may arise over the management of the trust. For example, you may disagree with the other beneficiaries regarding any of the following:
- Tax strategy;
- Accounting adequacy;
- Investment strategy; and
- Administration of trust.
For more information regarding marital deduction, contact North Palm Beach estate planning lawyer Al Morici Attorney at Law at 561-471-2551.