When you consider the institution of marriage as it stands in the United States in the 21st century, it is in a very real sense something different from what it once was. Of course you can’t paint with a broad brush because each person has a unique perspective, but the statistics would indicate that marriage is no longer something that is permanent in the minds many people. Statistics on the subject vary, but somewhere in the neighborhood of between 40% to 50% of marriages end in divorce, and some 75% of these people remarry. In about 60% of these remarriages there are children from previous marriages involved.
All of this clearly has a profound impact on estate planning. If you are divorced and have children from a previous marriage, getting married again can involve some delicate family dynamics. You want to make sure that your children are provided for after your death, and you want to take care of your new spouse as well.
The solution to these types of situations can be the execution of a prenuptial agreement that elucidates the personal property of each individual who is entering the marital union. You then create a qualified terminable interest property trust, which is commonly shortened to the acronym “QTIP” in estate planning circles.
With the QTIP you fund the trust and appoint a trustee as you would with any trust. In the event of your passing, your spouse will receive the income that the trust earns and even some of the principal in some cases for the rest of his or her life. When you fund the trust you name beneficiaries (presumably your children) who will assume ownership of the remainder of the trust when your surviving spouse dies.
With the QTIP you take care of your new spouse for life while leaving the balance of your legacy to your children, making these vehicles an elegant solution to a potentially difficult dilemma.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.