Legal Question in Wills and Trusts in California

Bypass trusts

My father passed away without setting up a Bypass Trust. Can my mother set one up? The goal is to avoid/minimize estate taxes upon her death.

Asked on 2/01/06, 10:22 pm

3 Answers from Attorneys

Christopher M. Brainard, Esq. C. M. Brainard & Associates - (310) 266-4115

Re: Bypass trusts

There is no such thing as a "bypass trust." You probably are referring to a living trust to bypass probate taxes. She should set one up and I would be happy to help you.

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Answered on 2/01/06, 10:32 pm
Zachary R. U. Rayo The Preble Law Firm

Re: Bypass trusts

Your mother can set up a "credit shelter trust" or "bypass trust" to take advantage of her estate tax applicable exemption amount. During 2005, the gross value of an estate that does not exceed $1.5 million was excluded from federal income tax filing requirements. In California, itís easy to have an estate that exceeds $1.5 million if you own a home, business, retirement account and/or a life insurance policy. For years 2006, 2007, 2008, that amount increases to $2 million. In 2009, the estate tax exemption amount will increase to $3.5 million. In 2010, there will be no federal estate tax. After 2010, the exemption amount will revert to $1 million, pending any legislative changes. Let your mother call me to discuss further.

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Answered on 2/01/06, 10:50 pm
Ken Koenen Koenen & Tokunaga, P.C.

Re: Bypass trusts

First of all, was there a trust to begin with for your father and mother. If so, sometimes you can petition the court to have the original trust "reformed" to include a bypass trust. Whether or not it is financially a reasonable thing to do will depend on the net value of the estate at the time he died.

If that doesn't work, there are other ways to shelter the estate from estate taxes. We would need to talk to determine what is best.

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Answered on 2/02/06, 11:52 am

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