If you and your spouse want to institute or maintain a bypass trust structure in your planning, you have many options. The portion that isn’t passing to your spouse (and thus won’t be subject to estate tax in your spouse’s estate) is often known as the “Residuary Trust” (though it’s also called a bypass trust, a credit shelter trust, or other names). The portion that will be subject to estate tax in your spouse’s estate (but won’t necessarily pass to your spouse outright) is sometimes known as the “Marital Share” or “Marital Trust.”
Though there’s a range of options for drafting each, to achieve the estate tax goals that your overall structure is designed to address, the Marital Share/Trust must grant certain minimum rights to your spouse to qualify for the estate tax marital deduction (in other words, to ensure that it isn’t subject to estate tax on your death), while the Residuary Trust can’t grant your spouse so many rights that it becomes subject to estate tax in his or her estate.
Subject to those limitations, you and your spouse can make selections for the Residuary Trust and Marital Share/Trust that:
As with all estate planning decisions, the options you choose will depend on your and your spouse’s wishes, personal and family situations, and financial and tax considerations.
Consult your estate planning advisors with any questions. Visit The Connolly Gallagher Trust & Estate page by clicking here.
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