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Bypass trusts in estate planning

On Behalf of | Sep 12, 2014 | Estate Planning

California couples who are planning their will may be wondering if a bypass trust might benefit their situation. Bypass trust works as a tool to limit the amount that a married couple’s estate is taxed after the death of one party. Furthermore, property in the form of a bypass trust may not subject to estate taxes.

When using a bypass trust, spouses must have separate wills that splits and balances the pre-death value of their estate into two shares. One of those shares must be linked to the designated amount of the exclusion allowed by law. The surviving spouse then keeps the other share. Upon the death of one of the spouses, the surviving spouse’s estate qualifies for the marital deduction, protecting the funds from unnecessary taxation.

For some couples, however, a plain will and portability can serve them better than the bypass trust method. For example, in cases where the couple’s children are not dependents and are able to take on large estates left to them from their parent’s will, the bypass trust may not necessary. Portability may also be preferred method to use if the couple’s combined wealth falls below twice the legal amount of exemptions allowed by law.

Couples seeking to create a will that best suits their situation might benefit by consulting an attorney who handles estate planning strategies that might include wills and different types of trusts. By fully understanding the options and the different ways to protect assets from unnecessary payments, a couple may be able to protect their wealth for their children’s benefit after the benefactors pass away.

Source: Agri-view, “Should a bypass trust be used as estate planning tool?”, September 05, 2014


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