A qualified terminable interest property trust allows your surviving spouse to benefit from the assets that have been conveyed into the trust during his or her lifetime. Your spouse will benefit from the income earned by the trust, and no other person can take over the assets during the surviving spouse’s life. Any exceptions allowing the surviving spouse to access the principal must be specifically stated in the trust agreement.
The advantage to the settlor who creates the trust is that when the surviving spouse dies, the settlor and not the surviving spouse controls who ultimately receives the assets that have been placed into the trust. This strategy is often employed to insure that children from a previous marriage remain beneficiaries of the settlor’s estate. This protects the assets of the trust from future spouses or children of the survivor or any other party for that matter.
Because the surviving spouse and the other beneficiaries have competing interests in the trust, some settlors will appoint a professional trustee to administer the trust. This would typically be a trust company or the trust department of a bank.
Because the trustee must answer to all parties with a financial interest in the trust, all parties are equally protected. This impartiality is key because there are no conflicts of interest. Plus, when you utilize a professional fiduciary to administer the qualified terminable interest property trust you know that the assets will be invested in accordance with accepted standards.
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