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What is a marital deduction Trust?
In keeping with that idea, the federal tax laws allow spouses to take advantage of the estate tax break by creating a “marital deduction trust” (“marital trust”) during their lifetimes.
What is a marital trust and how does it work?
When properly drafted, such a trust will shield the assets of both spouse’s from federal estate taxes when they die, as opposed to protecting only the deceased spouse’s estate through the § 2056 deduction. There are several requirements that must be met in order for a marital trust to be valid.
Do you have to pay estate tax on a marital trust?
In the case of a marital trust, the IRS subjects the remaining trustassets to federal estate taxes when the surviving spouse passes. However, a couple can take advantage of the federal gift and estate tax exemption. This is the amount that you can pass on to heirs before you’d ever owe an actual estate tax.
What is an irrevocable marital trust?
A marital trust is a type of irrevocable trustthat allows you to transfer assets to a surviving spouse tax free. It can also shield the estate of the surviving spouse before the remaining assets pass on to your children.
What is the difference between a QTIP and a marital gift trust?
While a QTIP does offer more overall direction of the funds, a marital gift trust has the flexibility of not mandating that the surviving spouse take annual allotments. Instead, they are able to leave principal in the trust if so desired, which may continue to increase the total assets through interest over time.
What is a marital trust and how is it different?
A marital trust, on the other hand, is similar in that some of the assets are appropriated for the surviving spouse while others remain for the ultimate beneficiaries. The difference is in how the assets are apportioned.
What is a qualified terminable interest Property Trust?
Arguably, the two most popular of these trusts are the Qualified Terminable Interest Property (often abbreviated as QTIP) and the Marital Trust, both of which maintain the donor’s estate tax exemption so that it can be brought into service by one or more of the beneficiaries of the trust itself.
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