You found the love of your life, and as you have built your life together, you have likely
weathered your fair share of storms and grown stronger because of them. Now that you are
married, you are uniquely situated to provide meaningful support for your spouse after your
passing through special estate planning tools available only to legally married individuals.
Lifetime Qualified Terminable Interest Property Trust
If one spouse individually owns more money or property than the other, a lifetime qualified
terminable interest property (QTIP) trust allows the wealthier spouse (grantor spouse) to
transfer money and property into the trust for the benefit of the less wealthy spouse (beneficiary
spouse). This alternative is generally better than making outright gifts to a spouse because it
may provide some creditor protection. A lifetime QTIP trust can also be a valuable strategy for
couples in a second or subsequent marriage. During their lifetime, the beneficiary spouse will
receive the income generated by trust assets and may also access trust principal for specific
purposes such as healthcare, education, or other needs as defined by the grantor spouse. This
structure allows the grantor spouse to provide for their partner during life while ultimately
preserving the remaining assets for the grantor spouse’s children from a prior marriage or other
chosen beneficiaries.
When the beneficiary spouse dies, the remaining property in the trust is included in their estate,
making use of their unused federal estate tax exemption. If the beneficiary spouse dies first, the
remaining trust property can continue (subject to applicable state law) for the grantor spouse’s
benefit. If the lifetime QTIP trust is properly structured, any remaining trust assets may be
excluded from the grantor spouse’s estate upon their death. After both spouses have passed,
the remaining trust property is distributed to the beneficiaries designated by the grantor spouse
when the trust was originally created.
A lifetime QTIP trust can offer meaningful benefits, but it may have unintended effects if a
marriage ends in divorce. Because the trust is irrevocable, the former spouse could remain
entitled to income for life unless the trust specifically defines the beneficiary spouse as the
current spouse. With thoughtful drafting and the help of an experienced estate planning
attorney, you can ensure that the trust reflects your wishes even if life takes an unexpected turn.
Spousal Lifetime Access Trust
A spousal lifetime access trust (SLAT) allows the grantor spouse to gift money or property into a
trust for the benefit of the beneficiary spouse, protecting the money and property from creditors
and estate tax while still allowing the grantor spouse to enjoy the money or property through the
beneficiary spouse. Unlike a lifetime QTIP trust, this type of trust does not require that the
beneficiary spouse be given access to the trust’s income. Instead, the beneficiary spouse may
be given access to income or principal during their lifetime depending on the grantor spouse’s
wishes. The goal of this strategy is to use the grantor spouse’s own estate tax exemption

instead of the beneficiary spouse’s. Additionally, other beneficiaries, such as children or
grandchildren, can be named as current beneficiaries of the trust.
Similar to lifetime QTIP trusts, SLATs also carry divorce-related risks. If you divorce, the
beneficiary spouse retains access to property in the SLAT. However, the grantor spouse likely
loses access to the trust upon divorce, as their only connection to the assets was indirectly
through the beneficiary spouse. Since the SLAT is irrevocable, there is no way to undo the
transfer or reclaim the assets. That is why many people include provisions limiting benefits to a
current spouse or add other beneficiaries, such as children, to preserve flexibility.
Note: If both spouses want to use their own exemption during their lifetimes through
estate planning tools such as SLATs, special attention needs to be paid to ensure that
reciprocal trusts are not drafted, which could unwind all of the planning. As experienced
attorneys, we can help ensure that both spouses’ goals are met in the most tax-efficient
manner.
Community Property Considerations
If you and your spouse reside in or acquire property in a community property state, it is essential
to determine the ownership interests in all property included in your estate plan. If community
property is going to fund one of these trusts, it may be necessary to enter into a partition
agreement or other marital agreement. Because this step may change the current ownership of
the property, it is critical that you work with an experienced attorney who will explain the process
and results.
Portability
With the exceptionally high estate tax exemption of $13.99 million per person in 2025, you may
feel that you do not need to worry about estate tax reduction strategies. However, this provision
will sunset on December 31, 2025, unless Congress takes additional action. If you die in 2026
or after, there is a possibility that the estate tax exemption could be reduced back to $5 million,
adjusted for inflation. Unfortunately, without a crystal ball, there is no way to know what the
exemption amount will be if you die after the sunset date. However, portability is a handy tool for
battling this uncertainty.
Portability allows a surviving spouse to use any unused portion of their deceased spouse’s
federal estate and gift tax exclusion—known as the deceased spouse’s unused exclusion
(DSUE) amount. This means that the surviving spouse can combine their own exclusion with
what remains of their spouse’s, which increases the amount that the surviving spouse can
transfer free of gift and estate tax. However, to take advantage of portability, a federal estate tax
return (Form 706) must be timely filed (usually within nine months of the deceased spouse’s
death, or longer if an extension has been granted) when the first spouse passes. Without this
filing, the surviving spouse will lose the DSUE amount and will have only their own exclusion
amount to use.

Note: The DSUE can be used only for your most recently deceased spouse. If you
remarry, you must use the first spouse’s DSUE before your new spouse
dies—otherwise, you will lose the ability to use the first spouse’s unused exclusion.
We Are Here to Help
You work every day to build a wonderful life for yourself and your family. Tina M. James, Esq. is
here to help design a unique plan to ensure that you, your spouse, and your family will be taken
care of now and upon your passing. Call her today to schedule an appointment to discuss how
she can help.