The question of whether a bypass trust—also known as an A-B trust or a credit shelter trust—can include funding for fertility treatments or adoption is increasingly relevant in modern estate planning. Traditionally, these trusts were designed to maximize estate tax benefits by sheltering a portion of the estate from taxes upon the first spouse’s death. However, with evolving family structures and the rising costs of both fertility treatments and adoption, individuals are seeking ways to incorporate these provisions into their long-term financial plans. While not a standard inclusion, it’s absolutely possible—and increasingly common—to structure a bypass trust to allow for these types of expenditures, provided the trust document is carefully drafted and addresses specific considerations. Currently, around 6% of all births in the United States are the result of assisted reproductive technology (ART) and adoption rates continue to rise as well, demonstrating the growing need for financial planning to accommodate these paths to parenthood.
What are the limitations of traditional bypass trusts?
Traditionally, bypass trusts focused solely on providing for the surviving spouse and potentially future generations, prioritizing assets like real estate, stocks, and bonds. The initial goal was to shelter assets from estate taxes, which, prior to recent changes in estate tax exemptions, were a significant concern for high-net-worth individuals. The Tax Cuts and Jobs Act of 2017 significantly increased the estate tax exemption—currently at $13.61 million per individual in 2024—reducing the urgency for many to establish these trusts solely for tax avoidance. This has allowed estate planners to be more creative with trust provisions, including those related to fertility treatments and adoption. However, it’s vital that the trust document specifically authorize these types of expenditures, as a trustee might be hesitant to use trust funds for purposes not explicitly outlined. Around 70% of estate planning attorneys report seeing an increase in requests for more personalized trust provisions in recent years, reflecting this trend.
How can a trust be drafted to cover fertility or adoption costs?
To include funding for fertility treatments or adoption, the trust document must contain clear and unambiguous language authorizing the trustee to use trust funds for these purposes. This could be worded as a specific provision allowing for “expenses related to assisted reproductive technology and/or the adoption of a child,” outlining the scope of covered costs—such as IVF, egg donation, agency fees, legal costs, and post-adoption support. It’s also important to specify any limitations or conditions, such as a maximum amount that can be spent or a requirement that the trustee consider the financial stability of the intended parents. Furthermore, the trust can address scenarios where the intended parents may not be able to complete the process, outlining how unused funds should be distributed. “A well-drafted trust is not a rigid document; it’s a flexible tool designed to adapt to the changing needs and circumstances of the beneficiaries,” states Steve Bliss, a San Diego Estate Planning Attorney.
What happened when the trust didn’t account for unforeseen circumstances?
I remember working with a couple, the Harrisons, who had established a bypass trust several years prior. They were focused on minimizing estate taxes and hadn’t considered the possibility of needing financial assistance for fertility treatments. Years later, they faced unexpected medical complications that made conceiving naturally impossible. They desperately wanted to start a family, but the cost of IVF was prohibitive. They realized their trust, while solid for its original purpose, lacked the flexibility to address this unforeseen circumstance. They had to deplete their personal savings to afford the treatments, putting a strain on their financial stability and delaying their dream of having a child. It was a painful reminder that estate planning should be comprehensive and consider all potential life events, not just those traditionally associated with wealth transfer.
How did careful planning create a successful outcome?
After the Harrison’s experience, I worked with another couple, the Millers, who were determined to avoid a similar situation. We carefully drafted their bypass trust to include a specific provision authorizing the trustee to use trust funds for fertility treatments or adoption, up to a designated amount. Years later, they faced similar challenges with conceiving. However, because their trust was thoughtfully prepared, they were able to access the necessary funds without depleting their personal savings. They successfully underwent IVF and welcomed a beautiful baby girl. The Millers’ story highlights the importance of proactive estate planning and the peace of mind that comes with knowing your wishes will be carried out, even in the face of unexpected life events. It’s a testament to the power of a well-crafted trust to provide financial security and support your family’s dreams.
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About Steve Bliss Esq. at The Law Firm of Steven F. Bliss Esq.:
The Law Firm of Steven F. Bliss Esq. is Temecula Probate Law. The Law Firm Of Steven F. Bliss Esq. is a Temecula Estate Planning Attorney. Steve Bliss is an experienced probate attorney. Steve Bliss is an Estate Planning Lawyer. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Steve Bliss Law. Our probate attorney will probate the estate. Attorney probate at Steve Bliss Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Steve Bliss Law will petition to open probate for you. Don’t go through a costly probate. Call Steve Bliss Law Today for estate planning, trusts and probate.
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or even: “Are student loans forgiven in bankruptcy?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.