In my last blog post, “When tax exemptions carry over: Portability explained,” I promised to talk today about the cons of portability and why I still believe in the usefulness of bypass trusts even for the 99 percent. To cut to the chase: Portability has its advantages, but it doesn’t provide some of the protections a bypass trust can offer.

I’m not going to delve into the specifics of bypass trusts here. But from a tax perspective these trusts, which are also known as credit shelter trusts, work by keeping the assets of the first spouse to die — or at least part of the assets — out of the surviving spouse’s taxable estate. Before portability, this was the only way both partners in a marriage could avoid federal estate taxes. These days, very wealthy couples still employ bypass trusts as tax saving tools, but for most people portability does the trick.

Notice how I said most people? There are a number of situations where bypass trusts come in handy. Because they are irrevocable, they can help shield assets against claims from creditors or disgruntled heirs. They also protect any possible appreciation of the assets from estate tax. But more than that, and this is a point that especially younger couples with children should consider, they can help safeguard the long-term wishes of a grantor even if a family’s circumstances change.

Let’s make things concrete. Let’s go back to the hypothetical example I created in my last post, where Kay dies, leaving Jim assets worth $6 million. Let’s say that Kay and Jim have a daughter, Clara, and that Kay always assumed that Clara will eventually inherit her and Jim’s combined assets. Regrettably, in our story, this is not what happens. The way it goes, Jim remarries a couple of years after Kay’s death. He and his new wife have a child of their own, and after Jim dies Clara ends up empty-handed. This could have been prevented by Kay providing for a bypass trust and designating Clara as the ultimate beneficiary. After Kay’s death, Jim would have received distributions from the trust, and upon his passing Clara would have inherited the remainder.

Beyond the convenience of bypass trusts for individual situations, there’s one general reason to keep them on the back burner: Laws can be fickle. Yes, Congress has made portability permanent, and right now it looks like it’s here to stay. But governments change and so do tax laws, meaning future legislation could repeal the American Taxpayer’s Relief Act or parts of it, for example by capping the estate and gift tax exemption rather than having it rise annually with inflation. If such a change were to happen, those with bypass trusts might just breathe easier.

By Kevin J. Moore