In my last post, I talked about why most people probably don’t need a bypass trust in their estate plans anymore. This is because most peoples’ estates are below the threshold for paying any estate tax–in 2015, $ 5,430,000 for an individual and $ 10,860,000 for a couple.
However, people may still want to establish some sort of a bypass trust in order to control who gets their assets when the second spouse dies. While both spouses are alive, they can agree on who gets their property when the second of them passes away. When the first spouse dies, his property goes into the bypass trust for the lifetime benefit of the second spouse. At that point, the bypass trust is irrevocable–its terms cannot be changed by the surviving spouse. When the second spouse dies, the property in the bypass trust will be distributed to the beneficiaries as they had previously agreed.
In contrast, when the second spouse simply inherits the property outright, she is free to amend the trust and thus to change the beneficiaries who will inherit when she dies.