Paralegal Advanced Competency Exam (PACE) Practice Exam

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Prepare for the Paralegal Advanced Competency Exam with confidence. Enhance your knowledge with a range of quizzes, multiple choice questions, and detailed explanations. Equip yourself with the skills necessary to excel in your paralegal career!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

A bypass trust is primarily designed to achieve what goal?

To save on legal fees after a spouse's death
To avoid a first tax when the first spouse dies
To circumvent taxes upon the death of a second spouse
To protect assets from creditors

The correct answer is: To circumvent taxes upon the death of a second spouse

A bypass trust is primarily designed to help avoid estate taxes upon the death of the surviving spouse, thus preserving the value of the estate for the beneficiaries. Established as part of a couple's estate planning, it allows for a portion of the deceased spouse's estate to pass into the trust, which is then not included in the surviving spouse's estate when they pass away. This mechanism helps to minimize or eliminate federal estate taxes triggered by the accumulation of wealth after the death of the first spouse. While options that mention saving on legal fees, avoiding taxes upon the first spouse's death, or protecting assets from creditors might touch on some aspects of estate planning strategies, they do not specifically capture the primary intent of a bypass trust. The focus is on preserving wealth from taxation when the second spouse dies, directly addressing the financial impact on the estate and ensuring that more value remains intact for the beneficiaries.