Skip to main content
Message Font: Serif | Sans-Serif
No. of Recommendations: 0
I'm trying to figure out, if my wife inherits money through a by-pass trust, whether that will affect our income taxes during the period between the death of one parent and the death of the second.

My little understanding of these trusts is that, to optimize inheritance tax exemptions, a trust is set up in such a way that when one of her parents dies, my wife "inherits," but actually the second parent has full use of the trust during his or her lifetime. I also understand that the trust pays taxes on income generated by the trust.

But does that income from the trust count towards our income, even though my wife can't use it? What about after both parents die, if the money remains in a trust, or trusts?

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.