So-called "QTIP trusts" can be valuable estate planning tools for remarried couples. After one spouse dies, the trust pays a lifetime income to the survivor. At the survivor’s death, the trust creator’s children from a previous marriage can inherit the trust assets.
Problems to resolve:
* How to invest? A stock-heavy portfolio may pay out little income to the surviving spouse but a portfolio loaded with bonds may enjoy little or no growth for the children.
One solution is to instruct the trustee to invest for long-term growth but pay out, say, 5 percent of trust assets each year. If the trust grows, all the beneficiaries will come out ahead.
* When to pay out? With a QTIP trust, the remainder beneficiaries may not inherit for many years, until the death of the surviving spouse. To give your children an earlier inheritance, consider naming them as beneficiaries of an insurance policy on your life.
