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 Montana Marital Deduction Trust, also known as Trust A or the Survivor's Trust, is a specialized type of trust that allows married couples to take full advantage of the federal estate tax marital deduction. This trust is typically established in conjunction with a Bypass Trust (also known as Trust B or the Family Trust) to minimize estate taxes and maximize the inheritance passed down to the beneficiaries. In a Montana Marital Deduction Trust, the assets are placed in the trust upon the death of the first spouse. The surviving spouse becomes the sole beneficiary during their lifetime and has the right to use and control the trust assets. This trust provides the surviving spouse with income and resources while minimizing estate taxes upon their passing. The surviving spouse can also distribute the trust assets to children or other beneficiaries as they see fit. One variation of the Montana Marital Deduction Trust is the Qualified Terminable Interest Property (TIP) Trust, which ensures that the surviving spouse receives income from the trust for their lifetime, with the remaining assets distributed to other beneficiaries upon their passing. Another type of Montana Marital Deduction Trust is the Unified Credit Trust (ACT), often used when a couple's combined estate value is expected to exceed the federal estate tax exemption limit. With an ACT, assets up to the exemption limit are placed in the Bypass Trust, while the remaining assets are placed in the Marital Deduction Trust. This helps maximize the use of both spouses' federal estate tax exemptions. It is important to consult an estate planning attorney or financial advisor to determine the most suitable type of Montana Marital Deduction Trust and Bypass Trust for your specific circumstances. By using these trusts effectively, married couples can minimize estate taxes, provide for the surviving spouse, and ensure a smooth transfer of wealth to future generations.
