The question of whether a bypass trust – also known as a marital trust or an A-B trust, though increasingly less common due to changes in estate tax laws – can provide monthly allowances instead of lump sums is a frequently asked one by clients seeking to plan for the financial security of a surviving spouse. The short answer is yes, absolutely. Bypass trusts are incredibly flexible planning tools, designed to maximize estate tax benefits while simultaneously ensuring the surviving spouse is well-cared for. While traditionally structured to pass assets beyond the estate tax exemption amount, the distribution provisions are entirely customizable. Instead of a single distribution upon the death of the first spouse, a well-drafted bypass trust can be designed to provide regular, monthly income to the surviving spouse for life, or a defined period.
What are the benefits of monthly income versus a lump sum distribution?
Many clients worry about a surviving spouse receiving a substantial lump sum and potentially mismanaging those funds, or becoming a target for scams. A monthly allowance, determined based on the surviving spouse’s needs and lifestyle, offers a degree of protection and financial stability. According to a study by the National Endowment for Financial Education, approximately 66% of Americans report feeling anxious about their financial future, and a predictable income stream can significantly reduce that anxiety. This is especially valuable if the surviving spouse isn’t accustomed to managing significant wealth or prefers a consistent, manageable budget. Beyond financial security, a monthly allowance can help preserve assets for future generations, ensuring that the trust doesn’t deplete quickly and the ultimate beneficiaries receive their intended inheritance.
How does a trust dictate monthly allowances and account for inflation?
The process of establishing a monthly allowance within a bypass trust involves careful consideration of the surviving spouse’s current and future needs. The trust document will outline the initial monthly amount, as well as a mechanism for adjusting that amount over time. A common approach is to tie the allowance to an inflation index, such as the Consumer Price Index (CPI), ensuring that the purchasing power of the income remains consistent. For example, the trust might state that the monthly allowance will be adjusted annually by the percentage change in the CPI. The trustee, responsible for administering the trust, will then calculate and implement these adjustments. Furthermore, the trust can address unforeseen circumstances, such as major medical expenses or long-term care needs, by allowing for discretionary distributions beyond the regular monthly allowance. A trustee’s fiduciary duty demands they act in the best interest of the beneficiary, considering both current and anticipated needs.
What happened when a client received a large inheritance all at once?
I remember Mr. Henderson, a retired engineer, who came to us after his wife unexpectedly passed away. He had inherited a substantial sum of money, a little over $800,000, and while grateful, he felt completely overwhelmed. He’d always relied on his wife to manage the finances, and now he was suddenly responsible for a large portfolio of assets. Within six months, he’d fallen prey to a convincing investment scam, losing nearly $150,000. He was devastated, not just by the financial loss, but by the realization that he’d been so easily taken advantage of. He was incredibly upset, and expressed his regret for not seeking out advice sooner. It was a painful lesson, highlighting the importance of careful planning and professional guidance. It was a hard situation to witness, and underscored the vulnerability many people face when suddenly confronted with a large sum of money.
How did a bypass trust save the day for the Thompson family?
The Thompsons, on the other hand, approached us proactively to establish a bypass trust as part of their estate plan. Mr. Thompson was concerned about providing for his wife, Elizabeth, in the event of his death, while also protecting their assets for their children. We designed a trust that provided Elizabeth with a monthly allowance sufficient to cover her living expenses, adjusted annually for inflation, along with discretionary distributions for healthcare or other unforeseen needs. Sadly, Mr. Thompson passed away unexpectedly a few years later. Thanks to the bypass trust, Elizabeth received a steady, predictable income stream, allowing her to maintain her lifestyle without worrying about managing a large inheritance. She was able to focus on her well-being and enjoy her retirement, knowing that her financial future was secure. The trust continued to provide for their children as well, ensuring they received their inheritance according to the Thompson’s wishes. It was a beautiful example of how careful planning can provide peace of mind and protect a family’s legacy.
<\strong>
About Steve Bliss Esq. at The Law Firm of Steven F. Bliss Esq.:
The Law Firm of Steven F. Bliss Esq. is Temecula Probate Law. The Law Firm Of Steven F. Bliss Esq. is a Temecula Estate Planning Attorney. Steve Bliss is an experienced probate attorney. Steve Bliss is an Estate Planning Lawyer. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Steve Bliss Law. Our probate attorney will probate the estate. Attorney probate at Steve Bliss Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Steve Bliss Law will petition to open probate for you. Don’t go through a costly probate. Call Steve Bliss Law Today for estate planning, trusts and probate.
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
- living trust
- revocable living trust
- irrevocable trust
- family trust
- wills & trusts
- wills
- estate planning
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/RL4LUmGoyQQDpNUy9
Address:
The Law Firm of Steven F. Bliss Esq.43920 Margarita Rd ste f, Temecula, CA 92592
(951) 223-7000
Feel free to ask Attorney Steve Bliss about: “How do I store my estate planning documents safely?”
Or “What is the role of a probate referee or appraiser?”
or “How does a trust work for blended families?
or even: “How does bankruptcy affect co-signers on loans?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.