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For married couples with significant assets, estate taxes can become a serious concern. A Bypass Trust — also called an AB Trust — is a classic estate planning tool designed to help reduce or eliminate federal estate taxes while ensuring financial protection for both spouses and their heirs.
Let’s break down how a Bypass Trust works, when it’s used, and whether it makes sense for your estate plan in Georgia.
What Is a Bypass (AB) Trust?
A Bypass Trust is a trust structure used by married couples to maximize estate tax exemptions by dividing the estate into two parts upon the death of the first spouse:
- Trust A (Survivor’s Trust): Holds the surviving spouse’s share of the estate
- Trust B (Bypass Trust): Holds the deceased spouse’s share, up to the estate tax exemption limit
The assets in the Bypass Trust “bypass” the surviving spouse’s taxable estate, helping preserve the federal estate tax exemption for both spouses.
Why Use a Bypass Trust?
The main goal is to avoid paying estate taxes on large estates by using both spouses’ estate tax exemptions.
Key Benefits:
- Avoids double taxation of the same assets
- Ensures the deceased spouse’s assets are distributed as intended
- Shields Bypass Trust assets from creditors or remarriage complications
- Offers income and support to the surviving spouse during their lifetime
How It Works in Practice
- When one spouse dies, their share of the estate goes into the Bypass Trust (Trust B), not directly to the surviving spouse.
- The surviving spouse may receive income or limited principal from Trust B but does not own those assets outright.
- The remaining assets in Trust B go to the final beneficiaries (e.g., children) when the second spouse dies.
- Trust A remains fully revocable and under the control of the surviving spouse.
By splitting the estate this way, both spouses use their full federal estate tax exemptions.
Do You Need a Bypass Trust in Georgia?
As of 2025, the federal estate tax exemption is $13.99 million per individual. Married couples can shield nearly $28 million with proper planning.
Georgia does not have its own estate or inheritance tax, so Bypass Trusts are most useful for:
- High net-worth couples
- Blended families (to ensure inheritance control)
- Couples concerned about future changes in tax laws
If Congress lowers the federal exemption in the future (which is scheduled to happen in 2026 unless extended), more families may benefit from a Bypass Trust structure.
Final Thoughts
A Bypass Trust is not for everyone, but for the right family, it can mean millions in estate tax savings and better inheritance control. The structure must be carefully drafted and coordinated with your overall estate plan.
At Hurban Law, LLC, we help Georgia couples understand if a Bypass (AB) Trust is the right move for their estate strategy. If you’re concerned about future estate taxes or inheritance control, we’re here to help.
Contact us today to explore whether a Bypass Trust makes sense for your family.
