Definition of a Bypass Trust
A bypass trust is typically created as part of an A/B Living trust (revocable living trust or inter vivos trust) estate plan after the death of the first spouse to die.
The bypass trust receives property as specified in the trust document - the bypass trust may receive all of the propery of the decedent spouse, or half of the spouses' co-owned property, or it may receive enough property to fully utilize the decedent's estate tax exclusion.
The bypass trust is typically created to achieve one or more of the following goals:
To maximize the use of the decedent's estate tax exclusion amount, in order to minimize estate tax upon the death of the surviving spouse
To ensure that the decedent spouse's property will be disposed of in accordance with the decedent's wishes, even if the surviving spouse remarries or chooses to adopt a different estate plan for the surviving spouse's assets.
Source: Wikipedia
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