It might have been best in the past to pack equities into the
bypass trust to maximize estate tax savings," said Shenkman.
Before the enactment of the portability provisions, spouses who both had assets exceeding the lifetime exclusion amount would typically set up a plan requiring that, on the death of the first spouse, an amount of assets equal to the exclusion amount would pass to a "credit shelter trust" or a
bypass trust for the benefit of the surviving spouse.
Spousal
bypass trusts complete the tax planning cycle for all concerned and potentially save a massive 40 per cent IHT liability on the estate above the nil rate band.
The Roth IRA is an excellent vehicle for funding a
bypass trust, because the distributions to the trust beneficiaries will be tax-free.
Depending on their purpose, these trusts are known as family trusts, credit equivalent
bypass trusts or credit shelter trusts.
The Marital and
Bypass trusts allow distributions of principal to Mom during her lifetime only if needed for her health, support or maintenance after considering other assets available to her.
Testamentary
bypass trusts are often structured this way.
estate tax stuff like
bypass trusts and qualified terminable interest property trust provisions.
Through
bypass trusts and a life insurance trust, Henry and Judith, a married couple, will escape estate tax on their $2 million estate.
Beginning next year, we will be faced with funding larger
bypass trusts.
A major aspect of estate planning for high-net-worth individuals is the proper use of the marital deduction, including use of
bypass trusts and QTIPs, to keep the total estate taxes for both spouses to a minimum.
If S corp stock was used to fund a marital trust or
bypass trust was the death of the first spouse, then care should be taken at the second death because only the stock owned by the marital trust will receive a stepped-up basis al the second death.
