An A-B trust is a joint trust created by a married couple for the purpose of minimizing estate taxes. It is formed with each spouse placing assets in the trust and naming as the final beneficiary any suitable person except the other spouse. The trust gets its name from the fact that it splits into two separate entities when one spouse dies. Trust A is the survivor’s trust and trust B is the decedent’s trust.
- An A-B trust is a joint trust created by a married couple; upon one spouse’s death, the trust splits into a survivor portion (the A trust) and a bypass portion (the decedent’s trust, or B trust).
- Via the split, the A-B trust effectively minimizes estate taxes and defers them until after the death of the surviving spouse.
- The surviving spouse has limited control over the decedent’s trust but the terms of the decedent’s trust can be set to allow the surviving spouse to access the assets, and even draw income from them.
- A-B trusts are no longer widely used as the estate tax exemption, which is now indexed to inflation, is sufficient for most estates.
