Marital/QTIP Trust in Los Alamitos, California

When you're a part of a loving partnership, your dreams, your assets, and your future are intertwined. It's only natural to want to protect what you've built together and ensure that your loved ones are cared for, no matter what the future holds. As an estate planning attorney and family man myself, I understand your aspirations and concerns. Setting up a marital trust is not just about financial planning—it's about securing your family's legacy. 

At the Law Offices of Lawrence H. Nemirow PC, I operate under the belief that each client's unique situation requires one-of-a-kind solutions. That's why I'm committed to providing individual attention, upholding the highest ethical standards, and protecting your best interests. Reach out to my law firm in Los Alamitos, California, to book an appointment and learn how I can help you achieve your goals.  

I offer my estate planning and probate services to clients across Los Alamitos, Los Angeles County, Orange County, Huntington Beach, Newport Beach, Cerritos, Santa Ana, Anaheim, and Long Beach. 

What Is a Marital Trust?

Imagine a scenario where a couple has built their life together over multiple decades and has accumulated wealth and valuable assets that could be life-changing resources for their children and grandchildren. In the event of one spouse's passing, a marital trust can ensure that the surviving spouse is financially supported while preserving the family's assets for future generations.

So what is a marital trust? And how do they work?

A marital trust (sometimes referred to as a spousal trust) is a type of irrevocable trust that allows a surviving spouse to inherit assets without immediately incurring estate taxes. Having one in place can also help shield the estate of the surviving spouse before any remaining assets pass on to their children or other heirs. For these reasons, many couples choose to incorporate marital trusts into their estate plans, as they help provide financial security and some peace of mind during an inevitably challenging time. 

Who Qualifies for a Marital Trust?

Marital trusts are generally available to married couples who want to safeguard their assets and minimize estate taxes. This option is a crucial part of comprehensive estate planning and can benefit a wide range of families. 

How Do Marital Trusts Work?

Upon the passing of the person who set up the trust, known as the "trust grantor," the assets in the trust move on to the surviving spouse without any federal estate taxes. Yes, you read that right—no taxes on this transfer. We owe this tax-saving strategy to Section 2056 of the Internal Revenue Code, also known as the “marital deduction rule.” 

Now, let's talk about what the surviving spouse can do with these assets. They can receive income generated by the trust, and in certain situations, they can even access the principal or the initial investment if there's a specific financial need. 

Additionally, the creator of the trust can empower the surviving spouse with something called “general power of appointment.” This authority allows the surviving spouse to instruct the trustee (the entity who manages the trust) on transferring trust assets. However, the trust grantor may choose to set limits on how much can be withdrawn. 

In most cases, when the surviving spouse eventually passes away, the trust assets move on to the couple’s children or other designated family members. But here's where it gets a bit nuanced: the specific rules governing different types of marital trusts determine who’s in control of the assets and their distribution. This brings us to our next point of focus: QTIP Trusts.  

What Is a QTIP Trust?

A Qualified Terminable Interest Property (QTIP) trust is a powerful estate planning tool for married couples. It allows you, as the creator of the trust, to provide for your surviving spouse while maintaining control over the ultimate distribution of your assets. 

What designates QTIP Trusts from other marital trusts is that only the surviving spouse can be the beneficiary of the trust during their lifetime and the trust is required to pay all income generated by the trust (dividends, interest, etc.) to the surviving spouse once a year at minimum. Ultimately, establishing a QTIP trust enables you to give your spouse all the income from the trust but can limit their right to the principal, meaning you can place restrictions on what the funds are used for and even how much can be taken out. 

Deferring Estate Taxes With QTIP Trusts

One significant advantage of a QTIP trust is a common theme throughout this page—its power to defer estate taxes. By placing assets in a QTIP trust, the estate tax is postponed until the surviving spouse's passing, preserving the family's wealth and minimizing tax liabilities. It’s important to note that a QTIP trust doesn't completely eliminate estate tax—it postpones it until the death of the second spouse.   

Another key thing to know is that you can only reap the estate tax benefits of a QTIP trust if your spouse is a U.S. citizen.   

At the Law Offices of Lawrence H. Nemirow PC, I take pride in helping families like yours navigate the complexities of marital and QTIP trusts. I am dedicated to upholding the highest ethical standards in every aspect of my practice to safeguard your interests. 

I want to ensure that you have all the information you need to make informed decisions about your family's financial future. If you have questions about how marital trusts can work for you, please don't hesitate to reach out. I'm here to provide clarity and guidance every step of the way.