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 ?
AB trusts: One change to the estate tax may end up being of concern to a lot of people.
The second thing is with regard to so-called AB trusts that are set up right now (see Tax terms 101, p.
* Create certain kinds of trusts, such as the AB trust. Each spouse leaves property to the children--with the crucial condition that the surviving spouse has the right to use the income that property produces for as long as he or she lives.
He discusses types of trusts; the tax-saving AB trust; choosing property to put in the trust; trustees; choosing beneficiaries; property left to minor children or young adults; preparing the trust document; transferring property to the trust; copying, storing, and registering the document; adding or selling property, amendments, and revoking the trust; what happens after the grantor dies; other aspects of estate plans, such as backup wills, taxes, planning for incapacity, and other probate-avoidance methods; wills; and getting help from lawyers.