Frequently Asked Questions about
Estate Planning, Wills, Trusts, and Probate

• Wouldn't a bypass trust "tie the hands" of my spouse?

In the preceding example, if Mrs. Lee had high expenses or unexpected medical problems during her remaining years, her wealth (including the “bypass” trust) might drop from $4 million – to $3 million or even to nothing. That unpleasant possibility frightens many couples into leaving everything to the survivor free and clear, rather than setting up trusts for the ultimate benefit of children or charity when the first spouse dies. These considerations become less important, however, if you realize that it is possible, and easy, to create an exemption trust of the type described above.

Whether you think of this as a technical rule, a loophole, a gift from Uncle Sam, or anything else, it is important to recognize the importance of this option. It can save estate taxes for any married couple with assets expected to be worth more than $2 million at the time of the second spouse’s death. For couples who expect their total assets to exceed $2 million at the time of the second spouse’s death (a highly probable outcome for middle-aged, upper-middle-class Northern Virginians), the estate tax savings may be substantial in coming years.

For those who are reluctant, for whatever reason, to place any limits at all on the survivor’s inheritance, it is possible to draft a “wait and see” estate plan that allows the survivor to re-evaluate his or her financial situation after the first spouse dies. If the use of an exemption trust seems justified, the survivor can “disclaim” property (which then passes into the exemption trust) – absent such an affirmative disclaimer, all property passes directly to the surviving spouse. (The corresponding drawback of this approach is that the survivor might fail to act wisely after the first spouse’s death, or might be incapacitated and thus unable to disclaim property at the appropriate time.) Young adults, and couples where one member is substantially younger than the other (and therefore might live decades longer than the older member), sometimes prefer this approach. Generally, though, we advise against it.

“It is a fine seasoning for joy to think of those we love.” –Molière