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Bypass trusts may be a useful tool for estate plans

There are many purposes that well-drafted estate plans can serve, including protecting assets from certain taxes. For married couples with considerable assets, bypass trusts may play a beneficial role when incorporated in their plans. Arizona residents may find that these trusts can ensure that taxes are controlled and surviving spouses and their heirs are provided for in the manner they desired.

Bypass trusts are actually two separate trusts in one. The first one, referred to as the A trust or marital trust, is set-up for the benefit of a surviving spouse. This trust can provide a surviving spouse with income and access to assets to use as he or she sees fit. The assets in this trust are tax exempt. This portion of the trust is also revocable with the terms subject to change as the surviving spouse chooses.

The B or family trust portion of the trust is non-revocable, and a surviving spouse may have limited access to these assets. The assets in this trust provide shelter from taxes up to the federal exemption amounts. These trusts are managed by a trustee, who can be either the surviving spouse or another trusted individual or entity who ensures that assets are distributed in the manner dictated by the terms.

The establishment of these types of trusts can be costly and require careful oversight. This is done by the trustee who is paid out of the trust for this management. In addition, the B portion may not provide protection from state taxes depending on the tax codes. Arizona residents who feel these tools may provide benefits for their particular estates may wish to consult with an experienced attorney who can draft the plans that best meet their unique needs.

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