What is a bypass or credit shelter trust?
A technique used for married couples, a bypass trust, (often referred to as a credit shelter trust) avoids probate at the second spouse’s death for property held in the trust and also makes certain that both spouses use their applicable estate tax credit amount. In 2003, community estates of $2,000,000 can be passed to children or other heirs, without death tax, by a married couple using this type of trust. The value allowed is two times the current applicable exclusion amount for an individual. The applicable exclusion amount ($1,000,000 in 2002 and 2003) is the dollar value of the assets protected from federal estate tax . It is scheduled to change as follows: $1,500,000 for 2004 and 2005; $2,000,000 for 2006-2008; $3,500,00 for 2009, zero federal estate tax for the year 2010; and $1,000,000 for 2011 and thereafter (unless permanently repealed or otherwise modified). Every person, married or not, has this exclusion amount. In practice, a bypass trust is funded at the death of the fir
