Regular readers of this blog already may be fairly knowledgeable about why establishing a will and often, a trust, is important in establishing your directives for the future.  There are many specialized types of trusts, each with its own specific purpose, each with a specific benefit.  This blog will focus on the bypass trust.

The bypass trust can also be referred to as an exemption trust, credit shelter trust, or AB trust.  But what is it?  It is a trust created with a specific purpose to reduce or even eliminate federal estate tax liability on a married couple’s estate.

Here is how a bypass trust functions:  an irrevocable trust is established to contain the assets of the first spouse in a married couple to die.  Then, when the surviving spouse dies, the assets in that trust will not be subject to federal estate taxes.  The beneficiaries named in the trust will inherit the assets.  If the bypass trust was constructed correctly, the consequent tax burden of the heirs will most likely be minimal, because the assets passed on were “owned” by the trust, and not by the late couple.

Is this type of trust recommended for everyone who happens to be married?  Not generally.  A bypass trust is most often beneficial only to couples whose estate value is over $5.34 million dollars.  For those individuals, this  type of trust can be a great advantage where taxes are concerned.

A highly experienced estate planning attorney can assist you in establishing a bypass trust or another type of trust that best suits your needs and circumstances.  It might also be a good time to simply review your current estate plan.  To set up a consultation, please contact us at 818.956.9200.

Glendale Location

616 E. Glenoaks Boulevard, Suite 203

Glendale, CA 91207

Sherman Oaks Location

15303 Ventura Boulevard, Suite 900

Sherman Oaks, CA 91403