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.
North Carolina Marital Deduction Trust, also known as Trust A, is a type of trust created by married individuals to maximize the amount of assets that can be passed to their spouse without incurring estate taxes. This trust is designed to take full advantage of the marital deduction offered under North Carolina law. With a North Carolina Marital Deduction Trust, the assets of the deceased spouse are transferred into the trust upon their death. The surviving spouse can then receive income from the trust and also access the principal if needed. The trust ensures that the assets are protected and preserved for the benefit of the surviving spouse while minimizing potential estate tax liabilities. One crucial aspect of the North Carolina Marital Deduction Trust is that it should be irrevocable, meaning the terms and conditions cannot be altered or revoked once established. By making the trust irrevocable, it ensures that the assets placed in the trust will not be included in the surviving spouse's estate for estate tax calculation purposes. Moreover, North Carolina also offers another type of trust called the Bypass Trust B or also known as Trust B. This trust functions alongside the Marital Deduction Trust A and aims to maximize the overall estate tax savings for a married couple. In a Bypass Trust B, a portion of the deceased spouse's assets, typically up to the estate tax exemption amount, is transferred into the trust. The surviving spouse cannot access the principal of this trust but can receive income generated by the trust assets. By placing assets in the Bypass Trust B, they are effectively "bypassing" the surviving spouse's estate and, thus, potentially reducing the estate tax burden upon their death. These two types of trusts, Trust A (Marital Deduction Trust) and Trust B (Bypass Trust), work together to provide married couples in North Carolina with comprehensive estate planning strategies. By utilizing both trusts, couples can maximize the assets passed to their beneficiaries while minimizing estate taxes. In summary, the North Carolina Marital Deduction Trust, known as Trust A, and the Bypass Trust B are important estate planning tools designed to protect assets and minimize estate taxes for married individuals in North Carolina. Understanding and implementing these trusts can help ensure that a couple's wealth is preserved for future generations.
