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Marital GST Trust

 

The Marital Generation Skipping Tax (GST) RLT is a Co-Grantor Revocable Living Trust designed for a married couple wanting the same basic features as the Married Person GST for a Sole-Grantor (and the Marital Universal Trust) but with broader applicability. In addition to allowing both spouses to create the trust as grantors, a notable feature of this format is that it can utilize the QTIP benefit with a “reverse QTIP election” option.

A reverse QTIP election can help to utilize the GST exclusion (of $1,000,000, adjusted for inflation) equally for both spouses. Thus, if the first spouse to die has a disproportionately large estate which would create a large QTIP trust principal at that grantor’s decease – taxed in the surviving grantor’s estate at his/her decease – then the personal representative of the surviving grantor (and, in some cases, the trustee of the first grantor to die) may reverse a portion of the QTIP election so as to effectively “equalize” the ultimate taxable estates of both spouses in an attempt to optimize transfer tax planning.

The Marital GST Trust constitutes a complex format and it’s normally suitable for larger estates with specific goals. If the patriarch/matriarch have a primary goal of benefiting 2nd (or 3rd) generation children with outright distributions and/or desire to keep significant outright distributions from 1st generation children then this format should be seriously considered. Additionally, it can serve to provide significant asset protection on behalf of the skip generation (1st generation children) while still providing generous benefits to them out of the trust estate.

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