In all of these types of trusts, the grantor is essentially making a current gift of the right to trust assets to the remainder person at a specified date in the future.
When there is a high probability that the client will outlive the trust term that is needed to obtain a low present value gift to the remainder person.
When the client has assets so substantial that a significant portion can be committed to a remainder person without compromising his own personal financial security.
That lease should require the grantor to pay a fair market rental to the remainder person.
Since the entire value of the personal residence placed in trust is $200,000 and the income interest retained by the grantor is $77,217, the value of the future interest gift being made at that point to the remainder person is the difference, $122,783.
The gift to the remainder person is a gift of a future interest.
Because the entire present value of the gift to the remainder person is taxable, that amount is considered an adjusted taxable gift.
When it is desirable to avoid ancillary administration, the Split is useful since at the termination of the first party's interest, the remainder person automatically by contract becomes full and complete owner of the property.
The term holder will be treated as if he made a gift to the remainder person, equal to the fair market value of the property less the actual consideration paid by the remainder person for the remainder interest.
If the consideration paid by the term holder is exactly equal to the actuarial value of the annuity or unitrust payments, there would be no taxable gift of the remainder, because the value of the annuity or unitrust payments would be subtracted in arriving at the taxable gift, as would the consideration paid by the remainder person.
The QTIP would then continue or distribute the proceeds for the benefit of or to the remainder persons of the QTIP.
Using the QTIP approach will be successful if there is a continuation of the business, in particular by children who are remainder persons under the QTIP trust.