So, are they saying that Bob was obligated by law to give them documents as named beneficiaries in the bypass trust? They couldn’t get those documents through the court? They weren’t co-trustees, correct? Any idea how Georgia’s will, entered into Probate for safekeeping, plays into the trust, if at all?
How a Bypass Trust Works
"Without a bypass trust, sometimes referred to as a credit shelter trust or an exemption equivalent trust, assets owned by the first spouse transfer upon death to the surviving spouse tax-free," says Ferriera. But that may simply increase the surviving spouse's estate when there is only one exemption, which could trigger an unnecessary estate tax. If assets are passed to a bypass trust, however, no estate tax would be owed on assets of $2 million or less.
A bypass trust is typically created in a living trust or a will, and the assets are then managed within the trust, says Ferriera. After the bypass trust has been funded, "the balance of the estate is usually transferred to the surviving spouse who is a U.S. citizen either outright, or put into a Qualified Terminable Interest Property (QTIP) trust to take advantage of the unlimited marital deduction" which pays income to the surviving spouse during that individual's lifetime; the remainder typically will pass to children when the surviving spouse dies.
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When the second spouse dies, assets in the bypass trust can be transferred to whomever the first spouse decided would be the ultimate beneficiary when the trust was created," says Ferriera. Most people name their spouse the primary beneficiary and their children the secondary beneficiaries, he adds.
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Selecting the Right Trustees
Trustees are determined when the trust or will creates the bypass trust, and most spouses name each other the primary trustees of their bypass trust, says Ferriera.
However, "we highly recommend naming a co-trustee, such as an adult child who's savvy with money to have some continuity-particularly since the original document might have been written years ago," he says.
[URL]http://www.investorguide.com/igu-article-202-trusts-bypass-trusts-for-married-couples.html[/URL]
