What is a Bypass Trust?
Georgia residents have the ability to create many different types of trusts that can have various purposes. It is possible to create a revocable trust, which allows the grantor (the person creating the trust) to continue to manage it during their lifetime. Most types of trusts, however, are irrevocable, which means that they cannot be altered or canceled once they are created. For the most part, any type of trust that provides a kind of benefit to the beneficiary — other than the assets themselves and the ability to avoid probate — will likely need to be created as an irrevocable trust. For example, a special needs trust that allows a disabled adult to maintain eligibility for public benefits while still having access to trust assets must be irrevocable. Similarly, a Medicaid asset protection trust that allows an older adult to be eligible for Medicaid coverage for nursing home care without having to spend down assets must be created as an irrevocable trust.
What type is a bypass trust, how does this type of trust work, and who needs one? Our Gwinnett County estate planning lawyer can provide you with more information.
What is a Bypass Trust?
A bypass trust is also known as a “credit shelter trust.” You might also see this type of trust referred to as an “AB trust.” This type of trust is designed for a person to pass assets to a beneficiary without the assets being subject to estate tax. It is a type of trust typically used between spouses, allowing one spouse to pass their assets to the other spouse upon death without the surviving spouse having to be responsible for estate tax on the trust assets while receiving income or principal from the trust during their lifetime.
How Do Bypass Trusts Work?
How does a bypass trust work? It begins when the grantor or settlor creates the trust. When the grantor dies, the trust essentially splits into two: into the A trust or the “survivor” trust for the surviving spouse, and into the B trust or the credit shelter trust. Some of the assets from the initial trust go into the survivor trust or A trust, and the rest of the assets into the B trust.
The assets in the A trust go directly to the surviving spouse. In addition, the surviving spouse can receive principal distributions for particular purposes as well as income from the B trust during his or her lifetime. Then, when the surviving spouse dies, the assets in the B trust are distributed to the designated beneficiaries.
Contact a Norcross Estate Planning Attorney for Assistance Creating a Bypass Trust
Do you think a bypass trust could be beneficial for you and your spouse? Whether you want to create a bypass trust, have questions about how bypass trusts work, or you want to find out more about other types of trusts, you should talk with an attorney. An experienced Norcross estate planning lawyer at Bowman Law Firm can speak with you today to provide you with more information about trusts in Georgia and to answer any other estate planning questions you have. Contact our firm to begin working on your estate plan.
Sources:
https://law.justia.com/codes/georgia/title-53/
