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What are the benefits of an A-B Trust?

On Behalf of | Dec 3, 2020 | Uncategorized |

Readers of this blog are likely familiar with estate planning tools, like trusts. Specifically, many may know about a bypass trust, also called the credit shelter trust and the B trust, but they may not know how they work with ew. And, this post will cover such “A-B trust” arraignments.

A-B trusts

The A and B refers to two trusts that work together in an estate plan. When the first spouse dies, their estate that is over the lifetime exemption is transferred into the A trust, also known as a marital trust. The surviving spouse then has control over the A trust, which avoids taxes as there is an unlimited spousal exemption.

Concurrently, the part of the estate that is up to the lifetime exemption is transferred into the B trust. This trust is an irrevocable trust, which means that the surviving spouse has no control over the B trust assets. They can utilize the profits and interest from those assets, but they do not have access to the underlying assets themselves. However, after the surviving spouse dies, both assets are distributed to the ultimate beneficiaries, usually one’s children or grandchildren. This is why A-B trusts are also sometimes called dynasty trusts in Florida.

Protections from bad investments

One of the key benefits, other than tax advantages, is that this form of trust can protect assets from scams, creditors, bad investments, etc. The B trust guarantees that the ultimate beneficiaries will get those assets in the trust. No one has to worry about the surviving spouse being scammed, making poor investment decisions or creditors accessing those assets. This is why these estate planning tools are especially useful for those on a second or more marriage.

Of course, these are just two of the many estate planning tools available to estate planning attorneys. For those interested in estate planning, which we should all be during these crazy times, they should contact a Fort Lauderdale, Florida, estate planning attorney.



Photo of Jennifer D. Sharpe