Why You May Need a Bypass Trust
If you have a taxable estate, the Bypass Trust can be used to fund with all or a portion of the deceased spouse’s exemption. The Bypass Trust is designed to bypass the spouse and reach the children. Previously, this was used more frequently before the creation of Portability.
Portability allows the surviving spouse to receive the deceased spouse’s estate tax credit upon death after filing a form 706. However, the Bypass Trust is still necessary to preserve the GST exemption, which is not subject to Portability. Additionally, Portability does not account for the significant growth of assets during the surviving spouse’s life.
Key Features of the Bypass Trust
Is it irrevocable or revocable?
The Bypass Trust is irrevocable, meaning it cannot be changed once it is created. This applies after the first spouse’s death.
Is a separate tax identification required?
Yes, the Bypass Trust requires a separate Tax Identification Number.
Is this subject to estate tax upon my death?
Yes, the purpose of a Bypass Trust is to force the use of the estate tax credit without triggering any tax payment.
Is there creditor protection?
Yes, the Bypass Trust has creditor protection for the beneficiaries based on the terms of the Trust.
Contact us today to schedule a consultation and learn more about how we can help you with your estate planning needs.
Other Estate Planning, Trust, and Probate Topics:
- Secure Act and Estate Planning Tax Law Changes for 2020
- Gifting Taxes and Trust Estate Planning
- Opening Probate in Ohio
- Does a Transfer on Death designation solve everything?
- Ohio Probate Claims and Statutes of Limitations Summary
- Irrevocable Trust Reformations and Terminations
- Cryptocurrency, Bitcoin, and Estate Planning
- What happens to your business after you die?
- Owning a Horse and Avoiding Probate
- Estate Tax Planning: SLAT, GRAT, & IDGT
- 30 Different Types of Trusts: Choosing the Right One for You