QTIP trust. A Qualified Terminable Interest Property (QTIP) trust is comparable to a marital trust. However, if the surviving spouse is entitled to a portion of your assets upon your death, he or she receives regular income payments but not the principal. When the surviving spouse dies, the remainder passes to the designated beneficiaries, potentially providing estate-tax benefits.
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Estate taxes. The 2016 federal estate tax exemption is $5.45 million for individuals who die in 2016 (up from $5.43 million in 2015). A 40% tax rate applies to the value of an estate in excess of the $5.45 million exemption. The federal gift tax exemption is also set at $5.45 million for 2016 (up from $5.43 million in 2015). Gifts in excess of the $5.45 million exemption will be taxed at 40% as well.
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These are just some of the estate planning considerations for a blended family. Other options may be available in your situation. Your estate-planning attorney can help optimize your estate plan under the current federal estate tax rules as well as point out any applicable state-specific tax rules when making these changes.