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Bypass trusts could assist in reducing estate taxes

On Behalf of | Apr 6, 2020 | Estate Tax

Many California residents worry about the taxes their estate may face after their passing. Many individuals may have wealth that exceeds the exemption limit, and as a result, they want to look into reducing estate taxes. Fortunately, a bypass trust may be able to help them do that.

A bypass trust comes in two parts. The first part is the marital trust that the trustmaker’s spouse maintains ownership of. The second part is a family trust, and after one spouse passes away, his or her portion of the estate goes into the family trust. The family trust is irrevocable and cannot be changed. Though the surviving spouse does not own the assets in the family trust, he or she could still access it.

The assets in the family trust are exempt from estate taxes as long as they do not exceed the annual exemption limit. Additionally, the assets held in the marital trust are not subjected to estate taxes either. Implementing a bypass trust can also help parties avoid probate proceedings, which can be a relief to surviving loved ones after the death of a family member.

Using a bypass trust may not be for everyone, but this planning tool could help California residents interested in reducing estate taxes. Because this type of trust can be complicated and difficult to create, interested individuals may want to reach out to experienced attorneys for help. These legal professionals can better ensure that the trust is created correctly and that the individuals understand how they can be used to their full potential.


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