T he facts of life include remarriage. Almost 42 million
adults in the U.S. have been married more than once, up from 22
million in 1980, according to the Pew Research Center.
For older Americans, remarriage can pose estate planning
Those challenges can also mess up your
Even for couples who share children, potential remarriage
might be a concern. And even if remarriage isn't a concern, your
surviving spouse may need help protecting assets from
overspending and scam artists.
So how can you provide for a surviving spouse yet still leave
your wealth to children from a prior marriage?
Suppose a hypothetical Al and Beth Boyd have kids and
grandkids. Boyd is concerned that he'll die first and pass on his
wealth to Beth, who'll remarry. Boyd's wealth might wind up with
One solution: use a
qualified terminable interest property (QTIP)
. When the first spouse dies, assets pass to the trust.
There's usually no estate tax if certain key conditions are
met. The surviving spouse must be a U.S. citizen, for
And the surviving spouse must be entitled to all of the trust
income. That income must be paid out at least once a year.
Those payouts must go on for the survivor's lifetime. No one
else can receive trust distributions during that period.
The trust creator also can give the trustee some flexibility.
In addition to income, distributions of principal to the survivor
might be allowed to pay normal living expenses and needed medical
No matter how many benefits are granted, the surviving spouse
must not control the QTIP assets.
Having The Last Word
Suppose Carl Davis marries Ella Ford. Both have children from
a prior marriage. Davis dies and leaves most of his wealth to a
QTIP trust for Ella.
Ella will have cash flow for life. But she can't name new
beneficiaries who'll get the QTIP assets after she dies.
Instead, the QTIP assets will pass to beneficiaries named by
Davis, such as his children. Those assets will be taxed in Ella's
Both spouses can set up QTIP trusts.
Some formalities must be observed to get these results. As the
trust creator, you must authorize your executor to finalize your
QTIP choice, or election, after your death. Both federal and
state elections may have to be made to get full estate tax
Your family should understand the goals of the QTIP to cut
discord after your death.
Your spouse will be able to count on lifetime distributions to
maintain a familiar lifestyle. And your children will realize
they'll inherit your wealth, which won't be squandered or given
away by a stepparent after your death.
Keeping The Peace
But a QTIP trust can cause problems. The surviving spouse may
want the trust fund to be invested for income. In fact, the
survivor can demand that the trustee sell assets that don't
produce any cash.
The children, though, may want the QTIP assets invested for
growth. So you should choose a trustee who can keep the peace
Tax deferral also can mean inheritance deferral. If your
surviving spouse lives long after your death, your children will
have to wait for any QTIP payout.
So you might want to carve out assets for immediate bequests
to your descendants. Or provide for them with life insurance that
will pay at your death.