Bypass / Credit Shelter Trust

What is it?

A bypass trust (also called credit shelter or family trust) holds assets up to the estate tax exemption amount, keeping them out of the surviving spouse's estate while still providing benefit during their lifetime.

Why is it important?

While portability allows unused exemption to transfer between spouses, a bypass trust provides additional benefits: asset protection, protection from remarriage, and ensuring appreciation stays out of the survivor's estate.

Example Language

Upon the first spouse's death, assets equal to the applicable exclusion amount shall fund the Bypass Trust. The surviving spouse shall receive income and principal for health, education, maintenance, and support, but shall not have a general power of appointment.