Bypass trust

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Bypass trust

An irrevocable trust that is designed to pay trust income (and principal, if needed) to an individual's spouse for the duration of the spouse's lifetime. The bypass trust is not part of the beneficiary spouse's estate and is not subject to federal estate taxes upon his/her death.

Bypass Trust

An irrevocable trust into which the trustor deposits funds and other assets to provide for a surviving spouse. In a bypass trust, the trustor names his/her surviving spouse as beneficiary and provides that the income and/or principal from the trust shall pass to that spouse upon the trustor's death. A bypass trust is common when a person wishes to avoid estate taxes on assets passing to the spouse. See also: Q-TIP.
References in periodicals archive ?
An AB Trust is a living trust which has come into vogue over the last couple of decades for married couples wishing to accomplish two objectives: 1) avoidance of the costs and delays of probate; and 2) avoidance of the imposition of estate taxes through the use of the tax credit protection trust known as the "B Trust" component of the AB Trust.
Congress may have given taxpayers a major gift in the form of the extension of the Bush tax cuts earlier this month, many families who have used living trusts, particularly those known as AB Trusts, for their estate planning are wondering just what are the implications of the Estate Tax exemption bump up to $5 million per individual and $10 million per married couple.
Now comes the question of what should be done, if anything, with respect to the many AB Trusts out there?