When it comes to estate planning, you will want to use all the available tools at your disposal. You might have already heard about establishing a trust, but there is one that doesn’t get the same attention as revocable or irrevocable ones. Bypass trusts can be an option for those married couples with substantial assets. They can help you pass more of your estate to your heirs. Do you want to know how it could help with your estate? Here is what you need to know about bypass trusts in Wisconsin.
What Is a Bypass Trust?
Most trusts offer many benefits, such as bypassing probate and asset protection. However, a bypass trust takes advantage of federal estate tax exemptions. Current federal estate tax exemptions are listed at $11.7 million per person. With that, you can pass up to $11.7 million in assets to your heirs without incurring any tax.
However, married couples have some portability. For example, if one spouse dies and does not use up their full estate tax exemption, the unused portion can be transferred to the surviving spouse. This increases the surviving spouse’s estate tax exemption.
How Bypass Trusts Work for Estate Planning
Estate planning helps ensure that your assets are distributed according to your wishes. Bypass trusts are another tool to achieve this goal. They allow couples to maximize their estate tax exemptions.
A bypass trust consists of two parts: a revocable marital trust and an irrevocable family trust. With the first spouse’s death, the marital trust passes directly to the surviving spouse.
Like most trusts, these options can be established as either revocable or irrevocable. An irrevocable family trust is funded with the marital trust’s remaining assets up to the estate tax exemption.
As a result, the assets in the family trust are not subject to estate tax when the surviving spouse dies. Instead, the assets in the family trust pass to the couple’s heirs tax-free.
Setting Up a Bypass Trust in Wisconsin
You will need to follow several steps to set up this type of trust. Like any trust, you will want to work with a qualified Wisconsin estate law attorney. With their help, you can clearly outline your goals, such as who you want to designate as a trustee and your beneficiaries.
Many times, you can name yourself as a trustee and manage these assets during your lifetime. You will also need to identify which assets you will use to fund your trust. After this process, you will need to draft a trust document that designates all the terms and conditions of the trust. Once you have funded and signed the documentation, your trust is active.
While that is a simplified version of establishing a bypass trust, you still want to talk to a Wisconsin estate law attorney. They can help you and your spouse find the best options for your situation.
Learn More About the Benefits of Bypass Trusts in Wisconsin
Bypass trusts can provide plenty of advantages in the state. However, there might be better options in some situations. By consulting with a professional, you can set up a bypass trust that maximizes your estate tax exemptions and ensures a larger inheritance for your heirs.
If you want to learn about your trust and estate planning options, contact Collins Law Firm. We proudly serve Southeastern Wisconsin and the Milwaukee area. Contact us or call (414) 207- 6292. Schedule your free and confidential consultation today!