What is a bypass trust?

A bypass trust, also called a credit shelter trust, is a tool married couples use to make the most of both spouses' estate tax exemptions. When the first spouse dies, assets up to the exemption amount go into the trust rather than directly to the survivor, keeping them out of the survivor's taxable estate. With the federal exemption now at 15 million dollars per person, far fewer couples need this strategy than in the past. It can still help in certain situations, so it's worth a conversation with an attorney.