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.
The Michigan Inter Vivos TIP Trust with Principal to Donor's Children on Spouse's Death is an estate planning tool that provides individuals with a way to pass their assets to their spouse while also ensuring that their children from a previous relationship or marriage are protected. This type of trust is specifically designed for married couples where one or both partners have children from previous relationships. The trust allows the spouse to have access to the trust income or principal during their lifetime, while upon their death, the remaining assets are distributed to the donor's children. This trust is known as an "Inter Vivos" trust because it is established during the lifetime of the donor and takes effect immediately. It is also referred to as a TIP (Qualified Terminable Interest Property) trust because it meets the criteria set by the Internal Revenue Service (IRS) to qualify for specific tax benefits. The primary purpose of this trust is to provide for the surviving spouse while ensuring that the donor's children ultimately inherit the remaining trust assets. By establishing this type of trust, the donor can protect their children's inheritance and also provide for their spouse's financial needs. In Michigan, there may be different variations of the Inter Vivos TIP Trust with Principal to Donor's Children on Spouse's Death, depending on the specific instructions and goals of the individual creating the trust. Some common variations may include: 1. Traditional Inter Vivos TIP Trust: This is the standard version of the trust, where the spouse receives income or principal from the trust during their lifetime, and upon their death, the remaining assets pass to the donor's children. 2. Charitable Inter Vivos TIP Trust: In this variation, a portion of the trust's assets is designated for charitable purposes. The surviving spouse may have access to the income or principal, and upon their death, the remaining assets are split between the donor's children and the designated charitable beneficiaries. 3. Marital and Non-Marital Interest Inter Vivos TIP Trust: This type of trust allows for a division of assets between the spouse and the donor's children. The spouse receives a portion of the trust's assets, while the remainder is distributed to the children upon the spouse's death. 4. Survivor's Marital Deduction Inter Vivos TIP Trust: This variation is designed to take full advantage of the marital deduction under federal estate tax laws. The surviving spouse is entitled to full income or principal distributions, and upon their death, the remaining assets are distributed to the donor's children. It is important to have a comprehensive understanding of the specific variant of the Michigan Inter Vivos TIP Trust with Principal to Donor's Children on Spouse's Death, as each may have different tax implications, estate planning goals, and provisions. Consulting with an experienced estate planning attorney can provide further guidance and help tailor the trust to meet individual needs.
