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.
The Massachusetts Marital Deduction Trust, also known as the Marital Trust A and Bypass Trust B, are two types of trusts commonly used in estate planning. These trusts are designed to take advantage of the marital deduction for estate tax purposes. The Marital Deduction Trust A is a trust created by a married couple to provide for the surviving spouse after the first spouse passes away. This trust allows the assets to pass to the surviving spouse without incurring any estate tax. The surviving spouse has access to the income generated by the trust assets and may even have access to the principal if needed for their health, support, maintenance, or education. Upon the death of the surviving spouse, the remaining trust assets are then distributed to the beneficiaries specified by the initial couple. On the other hand, the Bypass Trust B, also known as the Credit Shelter Trust or the Family Trust, is used to maximize the use of each spouse's estate tax exemption. When the first spouse dies, a portion of their assets, up to the value of their estate tax exemption, is placed in the Bypass Trust B. This trust allows those assets to pass to the beneficiaries without incurring estate tax upon the death of the second spouse. The surviving spouse can also have access to the income generated by the trust assets and, in some cases, may even have access to the principal. Additionally, there are variations or subtypes of the Massachusetts Marital Deduction Trust, including: 1. Qualified Terminable Interest Property (TIP) Trust: This type of trust is used when a spouse wants to provide income for their surviving spouse but also have control over the ultimate distribution of the assets. 2. Irrevocable Life Insurance Trust (IIT): This trust is specifically designed to hold life insurance policies outside the taxable estate, ensuring that the insurance proceeds are not subject to estate tax. 3. Charitable Marital Deduction Trust: This trust allows a surviving spouse to support charitable organizations while still taking advantage of the marital deduction for estate tax purposes. In conclusion, the Massachusetts Marital Deduction Trust — Trust A and Bypass Trust B are two essential tools in estate planning. While Trust A focuses on providing for the surviving spouse, Trust B maximizes the use of estate tax exemptions. By utilizing these trusts, individuals can minimize estate taxes, provide for their loved ones, and potentially support charitable causes.
