One of the biggest concerns of estate planning is the potential tax implication involved in transferring property. While estate taxes can be quite high, there are steps you can take to help minimize, or even eliminate, these taxes. For married couples, one powerful estate planning tool is a Bypass Trust. Our Minneapolis-based attorneys can help you establish a bypass trust that will protect your assets and minimize the taxes for your loved ones.
Minnesota Bypass Trusts
The primary purpose of bypass trusts is for married couples to minimize their estate taxes. A bypass trust essentially allows a surviving spouse to continue to take advantage of marital tax deductions and estate tax credits. When you establish a bypass trust, you establish your spouse as the beneficiary of the trust. Oftentimes, the trust will also establish a secondary beneficiary, typically the couple’s children, and this secondary beneficiary will also be able to receive these continued benefits that will reduce the tax burden of the estate.
A bypass trust separates an estate into two portions. The first portion will be the amount less than, or equal to, the applicable tax threshold for the estate. This portion will go into a Credit Shelter Trust. The remaining part of the estate will go directly to the spouse. The surviving spouse may choose to access the money in the Credit Shelter Trust, as follows:
- The surviving spouse can be the trustee;
- The surviving spouse may use all of the income;
- The surviving spouse may use the principal of the trust for any costs related to health, education, maintenance, and support
- The surviving spouse may take the greater of $5000 or 5% of the trust value per year
According to Minnesota law, a decedent may leave everything to his/her spouse as a tax-free inheritance. If a bypass trust is established, then the surviving spouse will have access to it as needed. In the event that the second spouse dies, the property in the Credit Shelter Trust will not count as part of the estate, resulting in reduced or even eliminated taxes for the beneficiaries.
A bypass trust is a type of irrevocable trust, which means it cannot be modified once it is established. To set up your bypass trust, you should contact a qualified estate planning attorney in Minnesota.
Bypass Trusts can seem confusing and complicated, but we are here to help make the process easier for you. Our attorneys have worked with thousands of clients since 1998. We have the experience and knowledge necessary to set up a bypass trust that will minimize the taxes on your estate. Contact the Brown Law Offices, P.A. at 763-323-6555 for a free consultation with one of our attorneys.