What Is a Bypass Trust (Credit Shelter or A-B Trust)?

1. How Does a Bypass Trust Work?

A bypass trust works by giving the surviving spouse the use of the first spouse’s property without ownership of it. A married couple signs a revocable living trust or wills that say what happens at the first death. The deceased spouse’s share splits in two. The bypass share, often called the B trust or the family trust, receives property up to the deceased spouse’s federal exemption. Everything else goes to the survivor outright or to a marital trust, often called the A trust.

The survivor can benefit from the bypass trust for life, commonly receiving all the income and any principal needed for health, education, maintenance and support. Because the survivor never owns the bypass property and has no power to take it for any purpose, the property is not taxed again at the survivor’s death. The trust bypasses the second estate, which is where the name comes from, and passes to the children or continues in trust for them.

Florida has no estate tax or inheritance tax of its own, so a bypass trust for a Florida couple exists for federal reasons and for the non-tax reasons in section 3. Our guide to the Florida estate tax covers what a Floridian owes and what a move from another state saves.

2. Why Did Portability Make Bypass Trusts Optional?

Portability made bypass trusts optional by letting a surviving spouse keep the deceased spouse’s unused exemption without any trust. For deaths after December 31, 2010, federal law adds the deceased spouse’s unused exclusion amount, called the DSUE, to the survivor’s own exemption. With a $15,000,000 exemption each in 2026, a married couple can pass about $30,000,000 with no federal estate tax and no bypass trust.

Before 2011, an exemption not used at the first death was lost. A husband who left everything to his wife wasted his exemption, and her estate paid tax on the combined property. The bypass trust was the only way to use both exemptions, which is why nearly every married couple’s trust from the 1980s to 2010 contains an A-B split.

Portability is not automatic. The executor of the first spouse’s estate has to file a federal estate tax return, Form 706, and elect portability on it, even where no tax is owed. The return is due 9 months after death, with a 6-month extension available, and the IRS allows a simplified late election within 5 years of death for estates not otherwise required to file. Our guide to Florida estate tax portability covers the election step by step.

3. When Does a Bypass Trust Still Matter?

A bypass trust still matters in five situations, because the DSUE is a fixed dollar figure owned by the survivor and a bypass trust is property held for the family.

1. Growth. The DSUE is set on the first spouse’s death and does not grow. Property in a bypass trust can double over a long widowhood and still pass free of estate tax, while the same growth in the survivor’s hands counts against the survivor’s exemption.
2. Grandchildren. Federal law makes the estate tax exemption portable but not the generation-skipping transfer exemption. A bypass trust lets the first spouse’s executor apply that spouse’s GST exemption to the trust, which our guide to the generation-skipping transfer trust explains.
3. A second marriage. The survivor can use only the DSUE of the last deceased spouse. A widow who remarries and outlives her second husband loses her first husband’s DSUE and takes the second husband’s, which can be smaller or zero. A bypass trust locks the first spouse’s share in place.
4. Children from an earlier marriage. Property left outright to a surviving spouse can be left to anyone the survivor chooses. A bypass trust fixes the children as the final beneficiaries while the survivor is supported for life.
5. Protection. A bypass trust with a spendthrift clause keeps the property away from the survivor’s creditors and a later spouse, which our guide to the Florida spendthrift trust covers. A couple who own property in a state with its own estate tax may also need one for that state’s tax, since several of those states do not allow portability.

4. What Does a Bypass Trust Cost the Family?

The main cost of a bypass trust is the capital gains tax the children pay later. Property that passes at death usually takes a new tax basis equal to its value on the date of death. Property in a bypass trust gets that new basis at the first death but not at the second, because it is not in the survivor’s estate. A house or portfolio that doubles during the survivor’s life carries the whole second-period gain to the children.

For most Florida couples under about $30,000,000, the trade runs against the trust. Leaving everything to the survivor and electing portability usually owes no estate tax, and the property gets a second new basis at the survivor’s death. Our guide to the step-up in basis covers the arithmetic.

A bypass trust also carries running costs. The trustee keeps separate records, files a federal income tax return, Form 1041, each year, and sends the beneficiaries the notices and accountings Florida requires, covered in our guides to trust administration and trustee fees. A Florida homestead follows its own rules when a spouse survives, covered in our guide to the homestead and a surviving spouse.

5. Can a Couple Decide at the First Death?

A couple can let the survivor decide at the first death through a disclaimer bypass trust. The documents leave everything to the survivor and say that anything the survivor refuses passes to a bypass trust. Federal law treats a written refusal, delivered within 9 months after the death and before the survivor accepts any benefit from the property, as though the property had never been left to the survivor.

The design lets the survivor look at the estate, the tax law and the family at the first death and fund a bypass trust only if it helps. The limit is the deadline and the discipline, since a survivor who takes an income check from the property first can no longer refuse it. A second design uses a marital trust and lets the executor decide how much qualifies for the marital deduction, and we match the choice to the couple.

6. Can a Bypass Trust Be Changed After the First Death?

The surviving spouse cannot rewrite a bypass trust after the first death. The survivor can use only the powers the trust gives, such as a limited power to redirect the property among the descendants at the survivor’s death. Florida law gives three other routes. The beneficiaries and trustee can change a trust by agreement in some cases, a court can modify one, and a trustee with discretion over principal can decant the property into a new trust with better terms. Our pages on changing a trust by agreement and decanting set out the statutes.

Older trusts with a formula that sends the full exemption to the bypass share now send up to $15,000,000 there and leave the survivor with little outright. A couple whose trust was signed before 2011 should have the formula reviewed while both spouses are alive, when a change is a simple amendment.

What Does a Plan With a Bypass Trust Cost?

The Complete Trust Plan for a couple is a flat fee from $4,500 and includes the revocable trust, the pour-over wills, the powers of attorney, the health-care documents and a deed funding the trust, with the bypass or disclaimer design where it fits. A review and amendment of an older A-B trust is a flat fee quoted at consult. Administering a bypass trust after a death, and a portability-only Form 706, are also quoted at consult. Recording and other government costs are additional and passed through at cost. Advertised fees are honored for 90 days from the posted date.

Frequently Asked Questions

Common Situations

The 1998 trust with a formula. A couple signed an A-B trust in 1998, when the exemption was $625,000. Their estate is now $3,000,000, and the formula would put all of it in the bypass trust at the first death, leaving the survivor with income only. The couple amend the trust to a disclaimer design while both are alive, so the survivor decides at the first death.

The second marriage. A widower with two children marries a woman with children of her own. He wants her supported for life and his children to receive what is left. His trust creates a bypass trust at his death for his exemption amount, pays her the income and support, and names his children as the final beneficiaries.

Sources of Law

• 26 U.S.C. §2010(c)(2)-(5) (applicable exclusion amount; basic exclusion amount of $15,000,000; deceased spousal unused exclusion amount of the last deceased spouse; election required on a timely filed return), law.cornell.edu; Rev. Proc. 2022-32 (simplified late portability election within 5 years of death).
• 26 U.S.C. §2631(a),(c) (GST exemption equal to the basic exclusion amount; no deceased spousal amount); 26 U.S.C. §2518(b) (qualified disclaimer in writing within 9 months, before acceptance of any benefit); 26 U.S.C. §2041(b)(1)(A) (ascertainable standard).
• Fla. Stat. §736.0814 (annotated)(2)(a) (a trustee who is also a beneficiary is limited to distributions for health, education, maintenance or support unless the trust expressly provides otherwise); §736.0412 (nonjudicial modification of irrevocable trusts); §736.04117 (trustee’s power to invade principal in trust, decanting).
• Case retold below: Fleck-Rubin v. Fleck, 933 So. 2d 38 (Fla. 2d DCA 2006). Opinion read in full; retrieved September 30, 2026.

What the A Share Can Do That the B Share Cannot

Cases with this shape keep coming up, and the fight in them is rarely about the tax. The fight is over who controls the two shares after the first death.

A Florida appeals court decided a case in 2006 that shows the difference. A husband signed a trust in December 1973 naming his wife and his brother as co-trustees. At his death in 1981 the trust split into a marital share, sized to take the full marital deduction, and a credit shelter share holding everything else. The trust gave the wife the income of the marital share and told the trustees to pay her principal from it on written request, even to the point of using it all up. The credit shelter share ended when she remarried in 1987. More than twenty years after his death, she asked the trust’s administrator to deliver the entire marital share to her, and the administrator did. Her brother-in-law, still a co-trustee, sued, and the trial court ordered her to return every dollar to him to manage for her benefit. The trust also said that a spouse serving as trustee could not take part in any discretionary decision about her own distributions. The appeals court reversed in 2006. The payment clause said the trustees shall pay, which left the trustees no discretion to exercise, so the clause limiting the wife’s discretion never applied.

My reading of that case is that the husband’s documents did exactly what they said, and what they said was that the marital share was hers for the asking. The protection for his side of the family lived only in the credit shelter share. In reviewing A-B trusts, I have a few take-home points.

The first is the withdrawal clause. A marital share that the survivor can empty on request is, in practice, the survivor’s money. An owner who wants the marital share preserved for the children gives the survivor income and support rather than an unlimited right to principal.

The second is the words shall and may. Shall pay creates a mandatory distribution the trustee cannot refuse, and may pay creates a discretion a co-trustee can supervise. Avoid relying on a clause that restricts a spouse’s discretion, because it has no effect on a distribution the trust makes mandatory.

The third is remarriage. His credit shelter share ended at her remarriage, six years after his death. An owner can decide at the drafting stage whether a second marriage ends the survivor’s benefit, and that decision belongs in the document in plain words.

One limit is worth stating plainly. The appeals court sent the case back to decide whether she had made her request in a signed writing delivered to the trustees, as the trust required, so the opinion does not say how the dispute ended. A dispute between a surviving spouse and a co-trustee is litigation, which we quote per matter.

Kevin D. Klagge, Esq., admitted in Florida since 2012. The case described above is a decision of a Florida court rather than a matter handled by this firm. Past results do not guarantee a similar outcome.

Updated on September 30, 2026. Reviewed by Kevin D. Klagge, Esq., Fla. Bar No. 99502. Attorney Kevin Klagge represents families, businesses, and international clients in estate and tax planning, business structuring, and international law, with a focus on Florida legal tools. He litigates estate and business issues in court. General information about federal and Florida law, not legal or tax advice, and no attorney-client relationship is created. Do not send confidential information until we have agreed to represent you.