SMITH & GARG, LLC

By the Estate Planning Attorneys at Smith & Garg, LLC, serving The Woodlands, Spring, Houston, Conroe, Humble, Kingwood, Tomball, Cypress, Huntsville, Westchase, Southwest, Sugar Land, West Oaks, Alief, Memorial, River Oaks, Stafford, Katy, Missouri City. Sugarland, Richmond, Alief and other surrounding areas in North, Northwest, South and Southwest Houston.

What is a bypass trust?

A Bypass Trust allows the estate tax exemption (currently $2 million; $3.5 million in 2009) to be used by each spouse. Instead of leaving all your assets outright to your surviving spouse, for example, you will leave assets up to the exemption amount (i.e., $2 million worth in 2008) in trust for your children, “bypassing” your surviving spouse. Your surviving spouse, though, can be trustee of this trust, and he or she can receive all income from the trust during his or her lifetime. He or she is also able to use as much of the principal of the trust as he or she needs for health, education, support and maintenance throughout his or her lifetime. Your surviving spouse never legally owns the property within the bypass trust because it is legally owned by the trust, so when he or she dies, the amount remaining in the bypass trust passes free of estate tax to your children.  

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