A bypass trust can benefit you in several ways after your spouse dies. Separating your spouse’s assets from your own can help you protect your money from creditors, reduce your estate taxes and more.
Despite its benefits, the problem with this type of trust is that there might not be a step-up in basis for your heirs after you die. When the end no longer justifies the means, you may want to consider opting out of a bypass trust. Here are some ways you can do this.
You can petition the court to end or modify a bypass trust, but there are some issues that you should prepare for beforehand. For one, identifying each beneficiary can be difficult in some cases. Unborn or underage beneficiaries could also complicate the process. When all else fails, you could try making the case that the trust’s settlor did not foresee some of the circumstantial changes that have happened over time.
Out of court
One of the simplest ways to get around a bypass trust is to come to an agreement with the other beneficiaries outside of court. If everyone agrees that the bypass trust is not helping, you can stop the trustee from funding it. However, one thing to keep in mind is that without a court order, objections could easily spring up later.
There is not much that an outdated trust can do for you or your loved ones. It is always good to assess the situation and decide if a bypass trust needs some replenishment. By paying attention to the right details, you can secure a better future for the people you care about.