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.
Utah Marital Deduction Trust — Trust A and Bypass Trust B are specific types of trusts commonly used in estate planning in Utah. These trusts aim to maximize the benefits spouses receive from each other's estate, while also minimizing estate taxes. Trust A, also known as the Utah Marital Deduction Trust, is designed to provide a surviving spouse with financial security and control over certain assets after the death of the first spouse. By creating Trust A, the deceased spouse's assets can be transferred into the trust and will not be subject to estate taxes upon their passing. The surviving spouse can then access and use these assets during their lifetime, ensuring their financial well-being and making it easier to manage their own estate planning. Bypass Trust B, also referred to as the Utah Bypass or Credit Shelter Trust, is established alongside Trust A to take advantage of the allowable estate tax exemptions. When the first spouse passes away, a portion of their estate is placed into Trust B, up to the maximum exemption limit set by the federal government. This trust is irrevocable and is typically created to benefit the surviving spouse and other beneficiaries, such as children or grandchildren. By allocating assets to Trust B, these assets are excluded from the surviving spouse's taxable estate, reducing the overall estate tax liability. The different types of Utah Marital Deduction Trusts can include: 1. Qualified Terminable Interest Property (TIP) Trust: This trust ensures that the deceased spouse can control how their assets are distributed after their surviving spouse's death. It provides flexibility in passing assets to other beneficiaries while still taking advantage of the marital deduction. 2. Charitable Remainder Trust (CRT): This type of trust allows a surviving spouse to pass assets to a charitable organization upon their death while providing them with an income stream during their lifetime. It allows the surviving spouse to support a cause they care about while potentially reducing estate taxes. 3. Qualified Personnel Residence Trust (PRT): This trust allows the transfer of a primary or secondary residence to a trust while still allowing the surviving spouse to live in the property. It can help preserve the value of the home for other beneficiaries while minimizing estate taxes. In summary, the Utah Marital Deduction Trust — Trust A and Bypass Trust B are integral parts of estate planning in Utah, providing financial security and minimizing estate taxes for spouses. Various types of these trusts, such as TIP trusts, CRTs, and Parts, offer flexibility and additional benefits depending on individual circumstances and goals. Consulting with an experienced estate planning attorney is recommended to determine the best approach for your specific needs.
