Bypass Trust

What Does Bypass Trust Mean?

A bypass trust is an estate planning tool designed to maximize the amount of assets that couples can transfer to their beneficiaries after their deaths. Bypass trusts achieve this by being subject to significantly lower taxes compared to regular assets.

Additionally, a bypass trust can serve as an alternative to a life insurance trust.

Insuranceopedia Explains Bypass Trust

Bypass trusts are created by couples, and the trust splits into two separate trusts when one partner dies. One of these trusts is entirely exempt from taxation, allowing significant tax savings for individuals with large estates, potentially amounting to hundreds of thousands or even millions of dollars.

Bypass trusts are often prepared by lawyers, as they must be properly drafted to be legally valid.