For a long time bypass trusts have been used by families as a strategy for avoiding or reducing estate tax liability. Because of recent changes in income and estate tax rates many bypass trusts might now trigger higher capital gains taxes for beneficiaries or heirs. This article discusses how estate planning professionals should advise any client who has an existing bypass trust. It is important for the adviser to review the situation with their client to see if corrective action is needed. There are ways for the bypass trust to be modified to prevent higher capital gains taxes. This article also provides some information about how people should consider decanting the trust. There have been many significant changes in the income and estate tax world and it is a good idea for people with bypass trusts to update their estate plan.
See John M. Goralka, An Estate Tax Time Bomb, Private Wealth, March 21, 2016.
Special thanks to Jim Hillhouse for bringing this article to my attention.
