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 Washington Inter Vivos TIP Trust with Principal to Donor's Children on Spouse's Death is a specific type of trust established in the state of Washington. This trust allows the donor to provide for their surviving spouse while also ensuring that the principal of the trust ultimately passes to their children upon the spouse's death. Here is a detailed description of this type of trust, along with relevant keywords: — Washington Inter VivoTIPIP Trust: This trust is an inter vivos trust, meaning it is created during the donor's lifetime. It is specifically designed to qualify for the marital deduction under the federal estate tax laws. This deduction allows the donor to transfer assets to the trust for the benefit of their spouse without incurring immediate estate taxes. — Principal to Donor's Children: The primary purpose of this trust is to ultimately distribute the principal (assets) to the donor's children upon the spouse's death. While the income generated by the trust can be used to support the spouse during their lifetime, the principal is preserved for the children. — Spouse's Death: The trust becomes effective after the death of the donor's spouse. At this point, the assets held in the trust are distributed to the donor's children according to the terms outlined in the trust document. — Marital Deduction: By using a Washington Inter Vivos TIP Trust, the donor can take advantage of the marital deduction. This deduction allows the donor to transfer a significant amount of assets to the trust, potentially reducing the overall estate tax liability. Different types of Washington Inter Vivos TIP Trusts with Principal to Donor's Children on Spouse's Death may include variations in the terms and conditions set forth in the trust document. For example: — Distribution Provisions: While the principal is ultimately distributed to the donor's children, the trust document may specify how and when this distribution occurs. It can be structured to provide a lump sum distribution or allow for periodic distributions over time. — Trustee Selection: The donor may choose to appoint a specific individual or a professional trustee to manage the trust assets and make distribution decisions. The trustee's role is crucial in ensuring the trust is administered in accordance with the donor's wishes. — Trust Term: The trust may have a specified term during which the spouse receives income from the trust, after which the principal is distributed to the children. Alternatively, the trust can continue for the spouse's lifetime, with the principal distributed upon their death. — Tax Planning Considerations: Depending on the donor's specific goals and circumstances, the trust can include various tax planning strategies. These may involve addressing potential capital gains taxes, generation-skipping transfer taxes, or implementing other estate planning techniques for optimal tax efficiency. In conclusion, a Washington Inter Vivos TIP Trust with Principal to Donor's Children on Spouse's Death is a flexible and tax-efficient estate planning tool used to benefit both a surviving spouse and the donor's children. By incorporating specific provisions and considerations, this trust can be tailored to meet the unique needs and objectives of the donor and their family.
