An A-B trust is a revocable living trust which divides into two trusts upon the death of the first spouse. This type of trust makes use of both the estate tax exemption ($3.5 million per person in 2009) and the marital deduction to make it so that no estate taxes are due upon the death of the first spouse. The B Trust is also known as the Bypass trust and it contains the amount of that years applicable exclusion amount. The A trust is the marital deduction trust which will typically contain both the surviving spouse's separate property and one half community property interests but also the residue of the deceased spouse's estate after the estate tax exemption has been utilized by the B trust. The use of an A-B trust ensures that both spouse's applicable exclusion amounts are effectively used, thereby doubling the amount of property which can pass to heirs free of Federal Estate Taxes.
A Kansas Marital Deduction Trust, commonly referred to as Trust A and Bypass Trust B, is a legal arrangement used in estate planning to minimize taxes and provide for a surviving spouse while ensuring the preservation and transfer of assets upon their passing. This trust structure is designed to take advantage of the federal estate tax exemption available to each individual. Trust A, also known as the Marital Trust, is created upon the death of the first spouse. It is irrevocable and holds assets for the benefit of the surviving spouse during their lifetime. The primary purpose of Trust A is to utilize the unlimited marital deduction, which allows the transfer of an unlimited amount of assets between spouses free from estate tax. By funding Trust A, the assets are effectively sheltered from estate taxes upon the death of the first spouse while providing for the surviving spouse's financial needs. Bypass Trust B, also known as the Family Trust or Credit Shelter Trust, is established alongside Trust A after the first spouse's passing. It is also irrevocable and holds assets that are exempted from estate taxes up to the federal estate tax exemption limit. Trust B ensures that the exemption amount is fully utilized and not lost upon the surviving spouse's death. Assets within Trust B can grow and be distributed to beneficiaries (typically children or other designated heirs) without being subject to estate taxes. In Kansas, the provisions of a Marital Deduction Trust may vary depending on the specific needs and goals of the individuals involved. Some variations of Kansas Marital Deduction Trusts include: 1. TIP Trust: A Qualified Terminable Interest Property Trust allows the surviving spouse to receive income generated by the trust assets while maintaining control over the ultimate distribution of the principal. 2. SLAT Trust: A Spousal Lifetime Access Trust is established by one spouse for the benefit of the other while providing a mechanism to transfer assets to future generations with potential tax advantages. 3. DOT Trust: A Qualified Domestic Trust is created when one spouse is not a U.S. citizen. It allows the surviving non-citizen spouse to receive income and benefits from the trust while deferring estate taxes until distribution to other beneficiaries. In conclusion, a Kansas Marital Deduction Trust, consisting of Trust A and Bypass Trust B, is a crucial estate planning tool for preserving wealth, minimizing estate taxes, and ensuring the financial well-being of surviving spouses. Different types of Kansas Marital Deduction Trusts, such as TIP Trusts, SLAT Trusts, and DOT Trusts, may be utilized depending on specific circumstances and objectives.
