Spousal Bypass Trusts

A spousal bypass trust is typically used to hold death-in-service benefits or life insurance proceeds outside of the surviving spouse's estate. Without this trust, these proceeds would form part of the surviving spouse's estate and could be subject to inheritance tax on their death.

How It Works

• Your death-in-service or life insurance is written into a spousal bypass trust
• On your death, the proceeds are paid into the trust — not directly to your spouse
• Trustees (who can include your spouse) manage the funds for the benefit of your family
• The proceeds are outside your spouse's estate for IHT purposes

Key Benefits

• Potential IHT saving on second death
• Your spouse can still benefit from the trust
• Protects proceeds from your spouse's future creditors or new partner
• Flexible — trustees can distribute as needed