12/15/2017

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Marital (Bypass) Trusts
by Jean Chatzky

Everything You Need To Know About Your Finances and Your Future.

There are many ways to preserve your unified credit., but this is one of the easiest. It involves hiring an estate planning attorney to draw up two different trusts, one for each spouse.

When the first spouse, say the husband, passes away, his will dictates that his trust be "funded"--in other words, that up to $675,000 (the current amount protected by the unified credit) be put into his trust even after his death.

While the assets are in the trust, they are managed by someone he chose--preferably someone who will keep his wife's needs in mind.

She can collect any income the trust generates and she may also (depending on the wording of the trust) be able to tap into the principal in certain emergencies--for medical reasons, special needs, and even at the discretion of the trustee (which is why you want a trustee who is certain to keep your spouse's best interests at heart).

When the wife also passes away, the assets in the trust pass to the heirs, tax free.

It's important to understand, however, that marital trusts are among the many trusts on this list that are irrevocable, meaning they can't be undone.

The risk of putting the money in trust is that if your spouse needs more income that the trust generates, the trustee may not, in all cases, have the power to give her more--or may simply decide not to give her more.

That's why you must be sure you both understand the ramifications when you establish marital trusts in the first place.

Author Biography: Jean Chatzky, author of Talking Money, Everything You Need to Know About Your Finances and Your Future, appears weekly on NBC's the Today show, twice weekly on MSNBC, and writes a monthly column on the back page of Money magazine, the nation's leading personal finance magazine with nearly two million subscribers. She is also a frequent contributor to USA Today.

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