Can a By-Pass Trust be Funded with an IRA?
May 23, 2007

Answer: A by-pass trust is a tax efficient trust which is created under a Will or Revocable Living Trust. Typically, people will leave their IRAs directly to a surviving spouse to avoid the immediate income taxation upon the owner's death. But IRAs can make up a significant portion of one's estate and if passed to a surviving spouse directly, could create an estate tax upon the death of the surviving spouse. To avoid this, consider using the IRA to fund a by-pass trust. Minimum Required Distributions would need to be paid, but the corpus of the IRA could be held outside of the taxable estate of the surviving spouse and avoid estate tax at his or her death.

If you have questions, please contact:
Charles B. Jones, Esquire

cjones@tandllaw.com
(443) 927-2111