Bypass Trust (Marital Life Estate Trust)

If the surviving spouse is trustee, he or she can have limited power over the assets in the Bypass Trust. The extent of this power depends on the terms of the trust, within limits set by the IRS. If a Trustee surviving spouse is given more power than IRS rules allow, the surviving spouse becomes the legal owner of the trust property -- the exact opposite of what was intended.

The surviving spouse may:

• Receive all interest or other income from the trust property.
• Use the property--for example, she can live in a house owned by the trust.
• Spend the trust property in any amount for his or her health, education, support and maintenance, in his or her accustomed manner of living.

If the surviving spouse is not the trustee of the bypass trust, then distributions may be made for any purpose by whoever (or whatever) is trustee to the surviving spouse as beneficiary.

After the death of the surviving spouse, the marital life estate trust property is distributed to the final beneficiaries, chosen by the deceased spouse in the original trust document.

The surviving spouse's property is also distributed to her beneficiaries.

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