Revocable Trust for Married Individual: Credit Shelter and QTIP Trusts with GST Tax Planning (California)

The legal template described here is a document that establishes a revocable trust specifically designed for married individuals residing in the state of California. This trust incorporates both a Credit Shelter Trust (also known as a bypass trust or family trust) and a Qualified Terminable Interest Property (QTIP) Trust, while incorporating planning for generation-skipping transfer (GST) tax.

A Credit Shelter Trust is a trust arrangement commonly utilized by married individuals to minimize estate taxes upon the death of the first spouse. By placing assets within this trust, the surviving spouse can benefit from the trust's income and use of the assets during their lifetime, while ensuring that the assets eventually pass to the intended heirs, such as children or other beneficiaries, upon the survivor's death. The assets placed in the Credit Shelter Trust are not subject to estate tax upon the survivor's death.

The QTIP Trust, on the other hand, allows for the postponement of estate taxes until the second spouse’s death. This marital trust enables the surviving spouse to receive income from the trust during their lifetime, while also giving the creator (grantor) of the trust control over how the assets are ultimately distributed. This trust is a valuable tool for married individuals who wish to provide for their spouses while still maintaining control over the ultimate disposition of the assets within the trust.

Lastly, this legal template incorporates planning for the generation-skipping transfer (GST) tax. The GST tax is imposed on transfers of wealth to beneficiaries who are two or more generations younger than the grantor, such as grandchildren or great-grandchildren. The inclusion of GST tax planning in the trust provides potential tax benefits when transferring assets to successive generations, ultimately reducing the overall estate tax burden for the family.

Overall, this legal template provides comprehensive provisions for married individuals residing in California who wish to establish a revocable trust that combines the benefits of a Credit Shelter Trust, a QTIP Trust, and GST tax planning. By utilizing this legal document, individuals can effectively protect their assets, minimize estate tax liabilities, provide for their surviving spouses, and efficiently transfer wealth to future generations.