The Q-TIP trust: an option for second marriages

When people think of estate planning, they automatically think of the will. It’s known for its simplicity: a listing who gets what. Life, of course, isn’t that simple. There are infinite family arrangements. Anyone who has been married more than once or who has children with more than one mother/father knows how complicated arrangements become. Trusts are a more complex form of estate planning with benefits for modern families, including provisions for how your assets are distributed.

Hugh Hefner’s estate

With the recent passing of Hugh Hefner, many are looking at the estate of the Playboy founder. The eccentric millionaire was married three times, with a notably younger wife at the time of his death. While full details haven’t emerged about his estate plan, it’s reported that his third wife will not inherit property. Instead, she’ll be “looked after.” The most likely way this will happen is through a Q-TIP trust.

What is a Q-TIP trust?

In a Q-TIP trust, properly called a Qualified Terminable Interest Property trust, the deceased establishes a trust that distributes income to a recipient, but not actual ownership of those assets. All property remains owned by the trust with a beneficiary (chosen by the deceased) for any remaining funds.

It’s similar to a marital deduction trust. The primary difference is the beneficiary structure. In a marital deduction trust, the spouse assumes control of the trust. If funds remain when the spouse passes away, then the spouse will choose a beneficiary. With a Q-TIP, the deceased (such as Hefner) picks the beneficiary.

Common usage

The most common reason why people choose a Q-TIP trust is for children from previous relationships. Many people choose to leave their estate to their spouse, with their children assuming those assets after the spouse passes away. This model works well in a family no second marriages, but when a parent remarries it changes the dynamics. Children from the first marriage may not agree with the second spouse, which creates conflict.

In Hefner’s situation, his estate is left to his children, while his wife receives income through the trust. If he prepared a Q-Tip trust, the arrangement is that his wife earns income off the trust while his children are the beneficiaries. That means his children will take over if his wife passes away.

Q-TIPS, marital deductions and many more

Trusts allow for precise and creative estate planning to fit your family structure, no matter how simple or complex it may be. A trust plans for asset distribution, timing, beneficiaries and other variables dependent on your situation and your property. An experienced estate planning attorney can review your property and assess your needs to help you decide what type of trust is right for you.