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My husband and I are planning to create a family trust. This is our first marriage.

Thousand Oaks, CA |

We have been married for 30 years. Is it better to create a survivor trust and a bypass trust or just a survivor trust so that when one of us die, all the asset will go to the survivor? I understand if you have a by pass trust, then the survivor is only allowed to have the income from the by pass trust and won't be able to touch the principal. If everything goes into the survivor trust, does the survivor has to pay taxes. Does the children have to pay taxes on the inheritance who inherits after the survivor's death?

Attorney Answers 6


These are all excellent questions for the estate planning attorney that you retain to prepare your documents for you. There are too many variables and unknowns in your fact situation, to give you any specific guidance in this forum. An attorney needs to review all of this information with you, especially in light of your objectives, in order to give you confident direction. You are wise to be taking care of this at this point.

James Frederick

***Please be sure to mark if you find the answer "helpful" or a "best" answer. Thank you! I hope this helps. ***************************************** LEGAL DISCLAIMER I am licensed to practice law in the State of Michigan and have offices in Wayne and Ingham Counties. My practice is focused in the areas of estate planning and probate administration. I am ethically required to state that the above answer does not create an attorney/client relationship. These responses should be considered general legal education and are intended to provide general information about the question asked. Frequently, the question does not include important facts that, if known, could significantly change the answer. Information provided on this site should not be used as a substitute for competent legal advice from a licensed attorney that practices in your state. The law changes frequently and varies from state to state. If I refer to your state's laws, you should not rely on what I say; I just did a quick Internet search and found something that looked relevant that I hoped you would find helpful. You should verify and confirm any information provided with an attorney licensed in your state. I hope you our answer helpful!

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I agree with Mr. Frederick. In addition, I would like to point out that you should not try to do this on your own. A qualified estate planning attorney can walk you through all of this very quickly.

The current estate tax exclusion is $5.25M for each spouse. If the planning is done right, no taxes should be incurred for a total estate less than $10.5M at the second death.

The general advice above does not constitute an attorney-client relationship: you haven't hired me or my firm or given me confidential information by posting on this public forum, and my answer on this public forum does not constitute attorney-client advice. IRS Circular 230 Disclosure: In order to comply with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. While I am licensed to practice in New York and California, I do not actively practice in New York. Regardless, nothing said should be deemed an opinion of law of any state. All readers need to do their own research or pay an attorney for a legal opinion if one is necessary or desired.

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The decision as to what type of trust to create should be made after consulting qualified counsel.
While a bypass trust does limit itself to income for the survivor there is usually a provision that allows the bypass trust principal to be invaded if the assets of the survivor's trust have been exhausted.
Taxes could occur if the survivor is not a citizen, otherwise there is an unlimited marital deduction for assets going to a surviving spouse. Who takes your property after death should be written into the trust.

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I agree that you should discuss your estate planning with an attorney. It is clear that you have been doing your research, which will help you in your discussions. Many attorneys provide a free initial consultation where you can have many concepts, like the ones in your question, explained. If after you talk, you decide not to hire the attorney, you have still gained valuable knowledge. Therefore, I recommend you consult with one or more estate planning attorneys.

One option you may not be considering is a trust that gives the survivor the option to divide the trust into a survivor's trust and exemption trust on the death of the first spouse. Whether this is a good option for you depends on many factors that cannot be covered in a short message.

Good luck with your estate planning.

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Hi there. You are on the right track, but let me suggest a different path.

I set up what is called a "disclaimer trust." This is a bypass trust, but it is only funded after the first of the trustors dies. The survivor has the statutory period (state law) to examine the tax law, and the estate values, and chose to disclaim some or none of the deceased's assets. If the survivor does disclaim, then the disclaimed assets go into the disclaimer/bypass trust.

This is a more flexible way to make way for tax planning. While the federal tax exemption is currently at $5M, it may be lowered in the future, and at least some states have much lower exemptions to maybe be concerned about.

There are many good reasons to proceed with getting your estate planning done, and through a professional.

Good luck.

Doug Holbrook
Holbrook & Associates LLC

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Agree with colleagues. Best to hire a local attorney whose primary focus and interest is estate planning. There are many factors to consider (i.e. cost, attentiveness, knowledge) when making your decision. The most important question to ask yourself - "Can I see myself working closely with this attorney?" Best. Craig

Mr.Scalise offers a FREE consultation; he may be reached at 805-244-6850 or by email ( My responses to questions posted here intended as helpful legal information not legal advice. The information I post does not create an attorney-client relationship. Mr. Scalise is licensed to practice law in California. If you would like to obtain specific legal advice about this issue, you must contact an attorney who is licensed to practice law in your state, and retain him/her.

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