What is a Marital Deduction Trust?
Estate planning in Connecticut usually involves various types of estate planning tools, including trusts. There are a wide range of trusts that can be created under Connecticut law, and they serve distinct purposes. A person who is making an estate plan might want to create a special needs trust to ensure that a disabled adult child or grandchild has access to assets without losing their eligibility for public benefits. Or, a person engaged in estate planning might have the goal of allowing loved ones to avoid probate whenever possible. There are also types of trusts that can help high net worth individuals to minimize estate taxes.
A marital deduction trust, often known more simply as a marital trust, is a specific type of trust that can allow one spouse to provide income for a surviving spouse while also allowing that spouse to minimize estate taxes and to effectively defer estate tax. Our Canton trusts and estate planning attorney can explain in more detail.
How Does a Marital Deduction Trust Work?
A marital deduction trust is a particular kind of trust that allows for property to be transferred between married spouses (upon the death of one spouse) without estate tax applying. How this works is that, when the first spouse dies, any of the assets in the marital deduction trust will pass to the trust without incurring estate tax. The spouse who set up the trust will not have to pay estate tax on those assets, and neither will the surviving spouse. Then, the issue of estate taxes is effectively deferred until the death of the surviving spouse.
This type of trust also ensures that the surviving spouse has financial support during the whole of their lifetime.
Specific Types of Marital Deduction Trusts: The QTIP Trust
The most common form of the marital deduction trust is known as a qualified terminable interest property trust, or a “QTIP” trust. This type of trust does all of the things described above, but in addition, it allows the settlor (i.e., the party who makes the trust) to also have control over how any remaining assets are distributed to other family members.
In other words, the surviving spouse does not inherit the assets such that they can then make decisions about how it will transfer upon their own death. Rather, the disposition of remaining assets will be decided by the settlor of the trust.
Contact a Canton, Connecticut Trusts Attorney
For many married Connecticut residents who want to ensure that their surviving spouse will have the assets they need while also being able to avoid a lengthy transfer of assets that may include estate taxes, a marital deduction trust can be extremely beneficial. These types of trusts are common in Connecticut and throughout the country, and an attorney can assist you today. Do not hesitate to get in touch with an experienced Canton trusts lawyer at the Law Office of Brian S. Karpe to find out more about marital deduction trusts and other types of trusts that may be beneficial to you based on your particular circumstances.
Sources:
portal.ct.gov/drs/individuals/individual-income-tax-portal/estate-and-gift-taxes/tax-information
law.cornell.edu/wex/marital_deduction_trust
