When the first spouse passes away, their share of the estate goes into the family or B trust. The surviving spouse has complete control over this part of the trust. They can sell, spend or give away assets as they see fit.
The surviving spouse may act as trustee of a bypass trust or name someone else trustee. The trustee also oversees asset management, as outlined by the terms of the trust. A bypast trust can minimize federal and state estate tax for married couples who have substantial assets. With the family or B portion of the trust, assets up to an annual exemption limit are not subject to federal estate tax. Hear about us on Radio or TV?
Client Access. Request a Meeting. Resource Library Search. Share This. Here is a basic summary of four common spousal trusts: 1. A Trust or Marital Trust A marital trust is a specific type of trust established for the benefit of a surviving spouse.
B Trust Bypass Trust B Trusts also called family trusts or credit shelter trusts work a little differently but are often used in concert with A Trusts—meaning oftentimes, when a spouse sets up an A Trust, they also set up a B Trust. Other Kinds of Trusts As previously mentioned, there are myriad types of trusts that serve many purposes.
Topics Tax Strategies , Estate Planning. Related Posts Article. The A portion of the AB Trust is the revocable part for the spouse and the B portion is the irrevocable part. The Marital Trust is another name for the Trust being left to the surviving spouse.
AB Trust Estate Planning can be most beneficial for couples who live in a state without a portability for exemptions. Essentially, an AB Trust could help these individuals avoid state estate taxes.
AB Trusts can also help ensure your beneficiaries are not changed by your spouse after your death. Similarly, these trusts can help designate where certain assets will go if you need to protect them from your spouse for whatever reason. For the most part, estate law has evolved enough to prevent the need for an AB trust if your intention is to prevent double taxation. This can limit the flexibility and freedom available to the surviving spouse.
The creation of a Trust can provide you with more control over your assets and help with your Estate Planning process. An AB Trust is one of the many options available to married couples — and is something worth considering for those who live in a state without certain exemptions.
AB Trusts can be a great way to guarantee your beneficiaries and provide support to your spouse after death. For example, it can fund education expenses, meet the special needs of heirs, or allow them to avoid or reduce estate taxes. Another option is to create a bare trust , a type of trust in which the beneficiary has an absolute right to the capital and assets within the trust, as well as any income generated.
While a trustee often oversees the investments within a bare trust, the beneficiary has the final say over how the trust's capital or income is distributed.
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