How a Bypass Trust Works
When the first spouse dies, assets up to the federal estate tax exemption are funded into the bypass trust instead of passing outright to the surviving spouse. The survivor can receive income from the trust, plus principal for health, education, maintenance, and support. Because the survivor never owns the assets outright, they are not included in the survivor's estate at the second death.
Are Bypass Trusts Still Useful?
With the federal exemption at $15 million per person in 2026 and portability available, many couples no longer need a mandatory bypass trust. Modern Arizona plans often use disclaimer trusts, which allow the surviving spouse to choose at the time of death whether to fund a bypass trust based on then-current tax law.
Arizona Statutory Context
A bypass trust must be drafted within Arizona's spousal protection framework, including the family allowances available under A.R.S. 14-2401.