Trusts and Estates

Ca. Trs. & Estates Quarterly 2016, Volume 22, Issue 1


By Daniel G. Brown, Esq. and Jennifer M. Stier, Esq.*


In this new era of a significantly increased estate tax exclusion and the option to elect portability, the tax concerns of many married couples have pivoted from estate tax avoidance to income tax avoidance, especially if their assets are valued below the estate tax exemption amount. As such, many clients no longer need complicated and administratively burdensome trust designs. Instead, an estate plan that leaves all assets to a surviving spouse, either outright or in trust, can meet a couple’s goals by avoiding estate tax, easing administration, and reducing income tax exposure.

This article provides a brief history of the bypass trust, the advantages and disadvantages of the bypass trust, and methods by which a client may terminate a bypass trust at varying stages of the client’s life. The techniques discussed in this article primarily benefit clients with estates less than that of a single estate tax exclusion ($5.45 million in 2016)1 or less than the combined exclusion where the surviving spouse elects portability of the deceased spouse’s unused exclusion amount.2

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