This is the ‘B Trust’ in an A-B trust planning protected from the federal estate tax by the decedent’s estate tax exemption amount. This trust is also known as a bypass trust because the trust ‘bypasses’ the estate tax in the decedent’s estate and the surviving spouse’s death. This type of trust will be valuable for many non-tax planning considerations, although it will not be as important for tax planning in light of the concept of portability in the estate tax law. You may need to change the terms of any bypass trust to address that lesser amount if you reside in a state with a lower estate tax exemption than federal estate tax law provides. For further information, look at the comments above in relation to A-B trust planning.

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