Estate planning gives you peace of mind that you’re protecting yourself and your loved ones. Many people taking part in estate planning in California secure their assets with trusts. As you might know, several types of trusts exist. One wise way to protect your spouse and beneficiaries is by creating a qualified terminable interest property (QTIP) trust.
Advantages of QTIP trusts
One advantage of a QTIP trust is financial protection for a surviving spouse. When one person in a marriage passes away with a QTIP trust, their surviving spouse receives income from this legal entity. This situation helps prevent a surviving spouse, especially if this individual doesn’t work.
Another benefit of QTIP trusts is also providing for the trust creator’s beneficiaries. Regardless of whether your surviving spouse remarries and joins a new family, your children or other named beneficiaries receive their inheritances.
The third benefit of QTIP trusts is delayed estate taxes. This type of trust delays estate-related taxes until the surviving spouse’s death. The tax-related savings are especially noticeable for high-net-worth estates.
Disadvantages of QTIP trusts
The first disadvantage of QTIP trusts is that they’re irrevocable. An irrevocable trust is one you can’t change after creating. If major financial or familial changes happen, there will be no way to change the terms of your QTIP trust.
For some, QTIP trusts can be costly to establish and maintain. These costs might be trivial to those with high net-worth estates. However, it’s wise to look into the exact costs of your QTIP trust.
It will cost time and money to set up a QTIP trust. However, it’s worth the financial and time investment to protect those you love after passing away.