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What is a Qualified Terminable Interest Property (QTIP) Trust?

What Is A Qualified Terminable Interest Property Qtip Trust

As you are journeying through life, you may be starting to think about what will happen once you are gone. If you are worried about your spouse or your family’s financial security, then you may be wondering what your options are.

These issues can be complicated to think about and sort through. However, it is customary to make sure your family is taken care of once you aren’t able to anymore. This is why you should seriously consider creating a trust during your estate planning. You must begin to establish a plan that promotes flexibility when allocating your estate property and maximizes the tax advantages. That is why many spouses find a Qualified Terminable Interest Property (QTIP) Trust a viable option.

If providing the best outcome for your family is valuable to you, then the benefits of a QTIP Trust are plentiful. Let’s take a closer look.

What is a Qualified Terminable Interest Property (QTIP) Trust, and How Does it Work?

A QTIP trust allows you to provide for your spouse if they survive you, while also allowing you to control how your trust assets are issued once your spouse dies. Any income, or even the principle, that is produced from the trust will be given to any surviving spouse so that you can ensure that your loved one is taken care of.

A QTIP Trust is essentially an A/B arrangement considered more restrictive than a standard marital trust fund. In most A/B arrangements, the A is the marital portion of the trust that is fully accessible by your spouse. Contrarily, a QTIP will only allow limited access to the trust assets. Rest assured that your spouse may be able to receive an income. However, the spouse can’t decide on the disposition of the assets and cannot draw the principle from the trust. You can request that more significant than $5,000 or 5% of the trust’s assets can be given annually to your spouse.

Besides leaving your spouse some money, QTIP can be a good way of limiting applicable estate and gift taxes. Any property included with the QTIP that provides funds to the surviving spouse qualifies for marital deductions. This means that the funds won’t be taxable after the death of the first spouse.

What is the Difference Between a QTIP and a Marital Trust?

Both a marital trust and a QTIP help to achieve similar estate planning goals. However, a QTIP offers a considerable direction of trust funds. In contrast, a marital trust has more flexibility because it does not require the surviving spouse to take annual distributions. The surviving spouse will also be able to appoint a new beneficiary following the death of the original proprietor with a marital trust fund.

Advantages of a QTIP Trust

Tax Deductions

A QTIP trust allows you to take advantage of tax deductions. As stated, that means that if you have a large estate, you can push off paying taxes on it until your spouse passes away. Yet, unlike a marital trust, many nuances make a QTIP trust preferable in certain circumstances.

Power to Appoint 

With a QTIP trust, your spouse won’t have control over the principle of your trust, and you will have the power to appoint who you want your trustees to be and future beneficiaries. This means that your spouse can receive income from the trust without ever having ownership of the trust. This can be helpful if you are remarried and have kids from a previous marriage and want them to be the beneficiaries of your trust after your new spouse passes. If you only have a marital trust set up, then there isn’t a guarantee that your children or grandchildren will take over the trust in the future.

Power of Protection

Lastly, by having a QTIP, you will place limits on what your spouse can access with the trust. This way, you can provide them with some protection if they are prone to scams or incapacity. If you limit their ability of what they can access from the fund, you can choose to allow them to have it for health care or access be approved by a separate trustee.

Is a QTIP Trust Right For Me?

Whether it’s a straightforward trust for an individual or family that owns a single home, or a complex, high-net worth, estate plan involving multi-faceted structuring, lifetime gifting, valuations, and irrevocable trust strategies, Brackin & Johnson will provide you with the estate planning and trust solutions you need to protect your family legacy.

Contact Brackin & Johnson today to assist with all of your estate planning needs. 

What to Know When Making a Will in Alabama

What to Know When Making a Will in Alabama

When they pass, most people want to ensure that their assets will go to the people closest to them. To make sure this happens, it is imperative that you create a last will and testament that spells out exactly how you would like your assets divided.

Your last will and testament is the document used after your passing that tells the courts how you would like your property and assets distributed. A last will and testament differs from a living will, which is only in effect during your lifetime and gives instructions on what should happen regarding your health and medical care should you become incapacitated and unable to make your own decisions.

Whether you need to have a large amount of property and assets divided, or if you have only a few assets to protect, you can (and should) make a will. 

What You Could Use Your Will for in Alabama

Your last will and testament protects your property and your family after your passing. Your will can be used for:

  • Communicating who you want to leave your property to
  • Naming a guardian for any minor children
  • Naming a person to manage property and assets left to minor children
  • Naming an executor to carry out the terms of your will

What Happens When You Do Not Have a Will When You Pass Away

Without a valid will in place, if you pass away, your property passes on to your heirs under intestate succession. Intestate succession can be much more burdensome for your heirs, both procedurally and financially. For example, a typical will would relieve the personal representative from posting a bond, filing an accounting of the estate, or obtaining leave of court to liquidate assets of the estate. When proceeding intestate, these tasks, and many others, are much more cumbersome. Intestate succession dictates how the courts will distribute your wealth, which is typically in a way that represents how an average person would set up a will.

If you are married when you pass away, your surviving spouse inherits your entire estate. However, if you have children or surviving parents, your estate could be divided, and each would receive a share of your estate. If you do not have a spouse or children, the courts will pass your estate to your parents, siblings, then grandparents, and so on.

If you want control over the distribution of your assets, it is vital to have a valid will in place. That is the only way to avoid intestacy laws.

Making Your Own Will vs. Having an Attorney Make Your Will

You do not need to hire an attorney to make your will. There are will-making products that will provide you with the documents you need to create a legal will. You should remember, however, that it is in your best interest to consult a lawyer, as the decisions you make will be legally binding and will dictate the distribution of your estate to your loved ones.

Legal Requirements for Making a Will in Alabama

There are specific legal requirements for a will to be considered valid in Alabama. These requirements pertain to the person making the will, as well as the will itself.  

To make a will in Alabama, you must be 18 years old or older and of sound mind (Alabama Code § 43-8-130). Being “of sound mind” means that you understand your actions and what the consequences are of making a will.

You must have a hard copy of your will, meaning it must be on actual paper. At this time, Alabama does not allow electronic, digital, handwritten, or oral wills. It must be typed and printed from a computer or typed on a typewriter. Your will must also be witnessed and signed by two people. (Alabama Code § 43-8-131)

Having Your Will Notarized

Alabama does not require your will to be notarized. It does, however, allow you to make your will “self-proving,” which would require you to visit a notary. If your will is self-proving, this could speed up the probate process because the court can accept the will and will not have to contact the witnesses that signed it.   

How to Change or Revoke Your Will

You can change or revoke your will at any time. If you are making changes to your will, you can create an amendment to your existing will. However, the best way to handle it would be to revoke your current will and make a new one. You can revoke your will by:

  • Making a new will revoking your prior will.
  • Burning, canceling, tearing, or destroying it. You may also consent for someone else to destroy it for you. However, if you have someone else destroy it, you must have at least two witnesses. (Alabama Code § 43-8-136

What if you got divorced and never removed your former spouse from your will? If you have named them executor or gifted them anything in your will, that is all automatically revoked. Should you choose to leave them in their given position or ensure that they receive the stated property, you must mention that in your will. (Alabama Code § 43-8-137)

Let the Expert Attorneys at Brackin & Johnson Help You Make Sure Your Will Protects Your Property and Family

While you may not want to think about what will happen when you pass away, you also want to make sure that your family is protected and taken care of. Having a will in place can help ensure that your assets get distributed in the way you want.

The experienced attorneys at Brackin & Johnson have been preparing estate planning documents of all kinds for decades. Whether your estate planning is simple or very complex, we will provide you with the estate planning solutions that you need to protect your family legacy.

Contact us today and let us assist you with all of your estate planning needs.

What You Need to Know About Legal Separation in Alabama

What You Need To Know About Legal Separation In Alabama

When your marriage is on the rocks, but divorce isn’t an option, you may wonder what you can do. In the state of Alabama, you may also petition the courts to be legally separated from your spouse.

There are many reasons that a couple may choose to separate but not end their marriage immediately. Some of these reasons may include religious beliefs, financial reasons, to make future divorce proceedings move quicker, or even if the couple isn’t positive that they want to split permanently.

Below, we will discuss the differences between a legal separation and a divorce in the state of Alabama. Upon reading this article, you will be able to make an educated decision on the best path to take for you and your family.

Legal Separation vs. Divorce

You may be wondering what the difference is between a legal separation and a divorce. Let’s get into a little more detail.

Divorce

Divorce is a process that legally ends a marriage. During the process, the courts will decide:

  • The division of marital property
  • Custody and child support
  • Spousal support (if applicable)  

At the end of the divorce proceedings, the courts will declare the marriage dissolved, and either party can remarry after a short waiting period.

Legal Separation

Although the courts will address the same legal issues as a divorce, the couple is still legally married at the end of the legal separation process. The couple may be living separately. However, if either party wants to remarry, they must request the courts to convert the separation case into a divorce.  

Why Couples Would Choose Legal Separation Over Divorce

Everyone knows that relationships can be tricky. And it’s not always apparent why a couple would choose to be legally separated instead of becoming divorced, but here are a few common reasons why they may make this decision:

  • They may want to work towards a reconciliation
  • To avoid the stigma of being divorced
  • Religious, social, or personal objections to being divorced
  • Monetary issues
  • The couple is going to live apart but wants a written agreement regarding custody and child support

What Does Legal Separation Mean?

To be legally separated in Alabama, you must have a court order. To qualify for a legal separation, one of the parties will need to file a request that the court intervene. The request will need to show that at least one spouse has been a state resident for at least six months and that at least one spouse wants to live apart from the other.

Although a legal separation isn’t ending the marriage, the court takes these cases very seriously. You will need to provide the court with a legal reason for your request.

You need to convince the court that your marriage has suffered a breakdown that it cannot recover from or that the couple is incompatible. And if you have children, you must also provide the court with how you plan on handling custody, visitation, and support.

If you are legally separated, you can live apart from each other, spend your money as you wish, and even get into a new relationship. However, if either party earns money or obtains property after the separation, that is considered separate property should you choose to proceed to a divorce. And, if you decide to remarry, you will need to ask the court to convert the separation into a divorce to terminate the marriage legally.

Make Sure to Have a Separation Agreement

If you are considering a separation without a trial, you need to be sure to have a separation agreement. While you and your spouse may verbally agree on terms, neither side can enforce that agreement with the Court’s contempt powers unless it is in writing, has been previously submitted to the Court, and incorporated in the Court’s Order.

Also, if there is no written agreement, a trial will be necessary in order to become legally separated. While you may feel uncomfortable asking your spouse for a written agreement, if you ask the court for a legal separation without a trial, you’ll need a written separation agreement.

Let the Expert Attorneys at Brackin & Johnson Help You Through the Legal Separation Process

Even if you have an amicable split from your spouse, having an attorney draft a separation agreement for you will benefit you. You should then allow your spouse to have the agreement reviewed by their attorney as well.

While you can draft the document yourself, it is a legal, binding contract after the judge signs the agreement. Therefore, if you inadvertently make a mistake, you will have to live with it or ask for a modification at a later date. You can avoid this by hiring an experienced family law attorney.

For over 40 years, the expert attorneys at Brackin & Johnson have helped clients achieve their goals by providing exceptional service tailored to each client’s needs. We value our role as your legal counsel, and we will take the time to make sure you understand what is going on with your case and how the law may affect your case.

Contact Brackin & Johnson today and let us help you through this time.

Contact Brackin & Johnson Today!

We produce results by getting our clients what they are entitled to receive.

(251) 943-4040

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