New §736.0505(3) Assures Tax/ Asset Protection of Inter Vivos QTIP Trusts

The Florida Bar Journal, December 2010.

Effective July 1, 2010, new F.S. §736.0505(3) allows married couples to take advantage more easily of one another’s estate tax exemptions and, at the same time, to enhance asset protection planning. Before enactment of the new statutory provision, it was unclear whether assets contributed to an inter vivos QTIP trust by one spouse that pass in trust for the benefit of the initial donor upon the death of the donor’s spouse would be subject to the claims of the donor spouse’s creditors, and, therefore, includible in the donor spouse’s estate under I.R.C. §2041. The new statute clarifies the asset protection and estate tax benefits of inter vivos QTIP trust planning. As described in this article, inter vivos QTIP trust planning can be enhanced if trusts are created by both the husband and wife, but only if the two trusts are not reciprocal.