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 Mississippi Marital Deduction Trust, also known as Trust A, and the Bypass Trust, also known as Trust B, are estate planning tools frequently utilized to maximize inheritance benefits while minimizing estate taxes for married couples. These trusts are designed to take advantage of the marital deduction provided by the state of Mississippi, allowing the transfer of assets between spouses without incurring gift or estate taxes. The Mississippi Marital Deduction Trust, or Trust A, is created upon the death of the first spouse. It is established to hold a portion of the deceased spouse's assets to benefit the surviving spouse during their lifetime. The surviving spouse can enjoy the income generated by the trust assets and may have limited rights to access the principal. Trust A is typically revocable and provides the surviving spouse with certain control over the assets, ensuring financial security while reducing estate tax liability upon their subsequent passing. On the other hand, the Bypass Trust, or Trust B, is also formed upon the death of the first spouse. It is aimed at preserving the deceased spouse's estate tax exemption, which is the maximum amount that can be inherited free of estate tax. Trust B does not qualify for the marital deduction, meaning the surviving spouse does not have unrestricted access to the trust assets. Instead, Trust B is typically designed to benefit the couple's children or other designated beneficiaries while protecting the trust assets from estate taxes. Trust B is usually irrevocable and structured to minimize estate tax liability upon the eventual passing of the surviving spouse. When these trusts are established together as part of a comprehensive estate plan, they operate in tandem to provide financial security and minimize estate taxes for a married couple. By utilizing the Mississippi Marital Deduction Trust — Trust A and Bypass Trust B, couples can effectively pass on their wealth to their chosen beneficiaries while taking advantage of the state's favorable tax regulations. Different variations of the Mississippi Marital Deduction Trusts might exist, depending on individual circumstances and estate planning objectives. These may include specific provisions to address issues such as long-term care planning, creditor protection, income tax considerations, and charitable giving. It is essential to consult with an experienced estate planning attorney to determine the most suitable strategy and tailor the trust structure to meet the unique needs of each couple.
