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 Oregon Marital Deduction Trust, also known as Trust A, is a legal arrangement that allows married couples in the state of Oregon to minimize estate taxes upon the death of one spouse. Trust A is established as part of a comprehensive estate plan and is designed to provide financial security for the surviving spouse while taking advantage of the marital deduction. The purpose of the Oregon Marital Deduction Trust A is to utilize the unlimited marital deduction, which allows assets to pass from one spouse to another without incurring immediate estate taxes. Upon the death of the first spouse, the assets are placed into Trust A, with the surviving spouse named as the primary beneficiary. The surviving spouse has full access to the trust's income and, in some cases, the principal. This provision ensures that the surviving spouse can maintain their quality of life and have access to the trust's assets. The key feature that differentiates Trust A from Trust B is how the assets are distributed upon the death of the surviving spouse. In Trust A, the surviving spouse can utilize the trust's assets during their lifetime but does not have the power to control the ultimate distribution. Upon the passing of the surviving spouse, the remaining assets in Trust A are distributed to the named beneficiaries, typically the children or other designated individuals. On the other hand, the Oregon Bypass Trust, also known as Trust B, is established in addition to Trust A and aims to further minimize estate taxes. Trust B is funded with an amount equal to the maximum allowable federal estate tax exemption. This portion of the estate is the amount protected from estate taxes. By utilizing the federal exemption amount in Trust B, the assets placed in this trust can grow and be passed onto the beneficiaries without incurring additional estate taxes upon the surviving spouse's death. While the terms of Trust A and Trust B may vary based on individual circumstances, these trusts are primarily implemented to maximize the utilization of estate tax exemptions and ensure efficient asset distribution upon the passing of both spouses. By considering the Oregon Marital Deduction Trust A and the Bypass Trust B, individuals can protect their assets, minimize tax liabilities, and provide for their loved ones in a strategic and comprehensive manner.
