1. QTIPs May Cause Problems (Unrelated To
Your Ears)
There may, in fact, be a free lunch somewhere, but a QTIP is not one.
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2. A QTIP – a “Qualified Terminable Interest Property” – is a way
to hold property for a surviving spouse that qualifies for the
unlimited marital deduction, but is not an outright bequest.
Why would someone want to do this? A spouse can always give
his or her assets outright to the surviving spouse tax-free. In the
case a straightforward bequest, the surviving spouse deals with
the assets as his or her own property (because it is, free and
clear). But sometimes you might ultimately wanted to give the
property to, say, your children from a previous marriage. A
QTIP would allow your spouse to have use of the property until
his or her own death, at which point it would pass to the
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LAW OFFICE OF DAVID PARKER BLOG
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3. As shown in the court case of In the Matter of The Estate of
Sydney Stark, as described in Forbes, this strategy has its own
hazards and problems. Mr. Stark used a QTIP to transfer an
apartment to his wife, and then ultimately to his children from a
previous marriage. The problem is that the unlimited exclusion
from estate taxes for a spousal bequest only applies to property
that is actually in the spouse’s ownership. As the apartment was
not, it incurred estate taxes on transfer to the children.
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4. Because Sylvia had her own child, who was the main
beneficiary of her estate, the estate tax bill went to her own
child unaccompanied by the assets to pay the IRS.
The case gives us an object lesson in careful NY estate
planning. It’s important, especially when conflicting interests
are involved, as is often the case in a blended family, that
competent legal advice be sought for purposes of New York
asset protection.
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5. Law Office of David Parker
Estate Planning and Elder Law
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