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Hear this out loud PauseHere's an AB trust example. John and Mary are married and set up an AB living trust. If John dies first, his share of the trust turns into a living irrevocable trust. Mary is allowed to access the income from the trust during her life, but not the principal.
Usually, the deceased spouse's portion of the couple's property, at least up to the applicable exclusion amount ($11.7 million), is put into trust B (the bypass trust). This trust is irrevocable and will pass to beneficiaries other than the surviving spouse (usually their children).
Hear this out loud PauseHowever, they also come with some disadvantages, such as complexity, cost, loss of step-up basis, and limited access to trust assets for the surviving spouse. Establishing an AB Trust requires careful planning and consultation with experienced legal and financial professionals.
Hear this out loud PauseThe A trust contains the surviving spouse's property interests, but they have limited control over the assets in the deceased spouse's trust; however, this limited control over the B trust will still enable the surviving spouse to live in the couple's house and draw income from the trust, provided these terms are ...
Hear this out loud PauseBut, in 2013, those estate tax laws changed dramatically. That exemption mentioned above was bumped up by a multiple of more than 12 times ? meaning that it now shielded a far greater number of estates from estate tax liability and, for many couples, also rendered their AB Trust obsolete.