Saturday, September 16, 2000

Savvy strategies

QTIP trust may be best for all

        Problem: You want your children from your first marriage to ultimately inherit everything — but want to provide for your second wife during the rest of her life.

        Strategy: Try a Qualified Terminable Interest Property (QTIP) trust so that the condition on the inheritance doesn't trigger estate taxes.

        Mench Financial Inc. says putting such a condition on a spousal inheritance could eliminate the marital deduction your spouse gets on your estate.

        But a QTIP trust is the best of both worlds: a legal way to attach strings to assets left to benefit your spouse without losing your right to the marital deduction.

        Perhaps the most common use of a QTIP is in the case of a second marriage. Without a QTIP and any estate plan, a second spouse could have the right to your assets when you die, and your children could get nothing.

        But by setting up a QTIP that will receive your estate when you die, all the income it generates could go to your second spouse. Upon his or her death, all of the principal in the QTIP trust could go to your children.

        Using the QTIP, you can ensure that your surviving spouse receives enough money to live comfortably after you're gone, while at the same time ensuring your spouse doesn't misspend assets. You can leave your children management control over a business, while ensuring a stream of income.

        A QTIP is relatively simple to set up, but a tax return will need to be filed annually by the trust. An independent trustee can oversee investments and distributions, and the surviving spouse can be given distributions of principal in case of hardship or other reasons if you leave discretion to the trustee.

        Readers: Consider Savvy Strategies as general information only and seek the help of professionals because circumstances might vary.

        Planners: Share your unique strategies with Enquirer readers. Send your Savvy Strategies to Amy Higgins, 312 Elm St., Cincinnati, OH 45202 or e-mail


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