A trust is a fiduciary relationship in which one party holds legal title to another's property for the benefit of a party who holds equitable title to the property. An inter vivos trust is a trust that becomes effective during the lifetime of the person creating the trust (the settler or trustor).
A qualified terminable interest property trust, often referred to as a "QTIP" trust, allows a bequest to a spouse in trust that, after a proper election by the beneficiary spouse, qualifies for the unlimited marital deduction:
" if the beneficiary spouse is entitled to all of the income from the trust property,
" if the income is payable annually or at more frequent intervals, and
" if no person, including the beneficiary spouse, has the power to appoint any part of the qualifying property to any person other than the beneficiary spouse during the beneficiary spouse's lifetime.
In order that the property transferred to a surviving spouse by means of an inter vivos marital deduction trust qualify for the marital deduction, the property must be includible in the trustor's gross estate for federal estate tax purpose.
A Delaware Inter Vivos TIP Trust with Principal to Donor's Children on Spouse's Death is a specific type of trust that provides a detailed and structured plan for distributing assets and wealth upon the death of a spouse. This trust allows the surviving spouse to have access to income generated from the trust assets during their lifetime while ensuring that the principal (the original assets) passes to the donor's children upon the surviving spouse's death. Here are some key points and subtypes to consider when discussing Delaware Inter Vivos TIP Trusts with Principal to Donor's Children on Spouse's Death: 1. Definition: A Delaware Inter Vivos TIP Trust is an irrevocable trust created during the lifetime of the donor (usually the first spouse) domiciled in Delaware. It stands for Qualified Terminable Interest Property Trust and ensures that the surviving spouse receives income from the trust assets, while ultimately passing the principal to the donor's children. 2. Principal Distribution: The primary purpose of this trust is to protect the principal (original assets) for the ultimate benefit of the donor's children upon the surviving spouse's death. It ensures that the surviving spouse cannot redirect or deplete the trust principal, providing a safeguard for the children's inheritance. 3. Income Distribution: During the surviving spouse's lifetime, they are entitled to receive income generated by the trust. This provides financial security and ensures that the surviving spouse can maintain their standard of living. 4. Delaware Advantage: Establishing this trust in Delaware offers certain advantages, such as favorable tax laws, strong asset protection, and flexible trust rules. These benefits make Delaware an attractive jurisdiction for setting up such trusts. Different Types of Delaware Inter Vivos TIP Trusts with Principal to Donor's Children on Spouse's Death: 1. Irrevocable Delaware Inter Vivos TIP Trust: This type of trust is established with the intention of being unchangeable, providing a clear plan for asset distribution and protection. 2. Revocable Delaware Inter Vivos TIP Trust: Unlike the irrevocable trust, this type of trust allows for changes or amendments during the donor's lifetime. However, once the donor passes away, the trust becomes irrevocable. 3. Dynasty Delaware Inter Vivos TIP Trust: This trust extends beyond the surviving spouse's lifetime and can span multiple generations. It allows for the preservation and transfer of wealth within the family while providing asset protection benefits. In summary, a Delaware Inter Vivos TIP Trust with Principal to Donor's Children on Spouse's Death is a strategic estate planning tool that ensures the surviving spouse has access to income while protecting the principal for the donor's children. Establishing this type of trust in Delaware offers various benefits, including favorable tax laws and strong asset protection provisions.
