Share

Round Rock, TX Attorney Blog

Tuesday, May 19, 2015

Using an A/B or ‘Bypass Trust’ to Avoid Double Estate Taxation

My spouse and I maintain assets approaching the federal estate tax threshold. Should we look into transferring our assets to trust? 


Currently, the federal government may impose an estate tax on transferred assets of $5.43 million per individual, or $10.86 million per couple, with a top taxation rate of 40 percent. For higher net-worth couples, a 40 percent tax rate on their hard-earned wealth is simply unthinkable – and fortunately, there are strategies available to avoid this type of tax burden for both the surviving spouse and the ultimate beneficiaries. 

An experienced estate planning attorney, such as Gerald Winters, can help you best meet your financial goals.  One option  many couples have chosen when dealing with this situation is creating a bypass trust.  These trusts, also known as A/B trusts, will address the death of each spouse individually, obviously beginning with the death of the first spouse. Assuming the trust is properly funded, the death of the first spouse will trigger a division of assets into one of two sub-trusts. Sub-trust A will be held for the benefit of the surviving spouse, and is accessible to him or her as needed for the duration of his or her life. Sub-trust B will hold assets in an amount, which does not exceed the federal or state tax threshold, and will remain in trust for the benefit of named beneficiaries, other than the surviving spouse. This way, when the surviving spouse passes away, the contents of Sub-trust B will bypass his or her gross estate for the benefit of the couple’s children or next-of-kin and escape any valuation for estate tax purposes. 

Executing an A/B or bypass trust has additional benefits aside from estate tax savings. Probably one of the biggest benefits of an A/B trust is the ability to skip the probate process upon the death of the second spouse, which will save a significant amount of time and unnecessary expenses. In addition, managing trust assets through the use of a trustee helps to maintain family privacy – particularly upon the distribution of real estate and other titled assets. 

If you are interested in a bypass Trust, or have any other estate related questions, contact trusted Porter and Valparaiso County estate planning attorney Gerald Winters at the Winters Law Firm by calling at (219)307-4373 today. 


Archived Posts

2017
2016
December
November
October
September
August
July
June
May
April
March
February
January
2015
December
November
October
September
August
July
June
May
April
March
February
January
2014


Estate Planning and Elder Law News



© 2017 Gerald Winters, P.C. | Disclaimer
1000 Heritage Center Circle, Round Rock, TX 78664
| Phone: 512-270-3807

Estate Planning | Elder Law | Tax Law | Business Law | | Attorney Profile

Law Firm Website Design by
Amicus Creative