Travis Texas Marital-deduction Residuary Trust with a Single Trustor and Lifetime Income and Power of Appointment in Beneficiary Spouse
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FAQ
Marital deduction planning allows married couples to transfer assets to each other without incurring federal estate taxes. By utilizing trusts like the Travis Texas Marital-deduction Residuary Trust with a Single Trustor and Lifetime Income and Power of Appointment in Beneficiary Spouse, spouses can effectively manage their estate while benefiting from tax advantages. This strategy helps in maximizing the wealth that passes to beneficiaries.
It allows one marriage partner to transfer an unlimited amount of assets to his or her spouse without incurring a tax. The marital deduction is determinable from the overall gross estate. The total value of the assets passed on to the spouse is subtracted from that amount, giving us the marital deduction.
For a married couple, the marital deduction/bypass trust, sometimes referred to as an AB trust, can take the form of a revocable living trust created by each spouse as grantor, or a joint revocable trust created by both spouses as grantors.
In most cases, the trust assets pass on to the couple's children or other family members when the surviving spouse passes. However, the rules of different types of marital trusts dictate whom can be named beneficiary after the surviving spouse's death.
After one spouse dies, the surviving spouse is free to amend the terms of the trust document that deal with his or her property, but can't change the parts that determine what happens to the deceased spouse's trust property.
How a Marital Trust Works. A marital trust allows the couple's heirs to avoid probate and take less of a hit from estate taxes by taking full advantage of the unlimited marital deductiona provision that enables spouses to pass assets to each other without tax consequences.
A Bypass Trust is a sub-Trust that becomes irrevocable after the first spouse dies. A Bypass Trust is sometimes called a Residual Trust, a Family Trust, or a Tax Avoidance Trust.
A marital trust is a type of irrevocable trust that allows one spouse to transfer assets to a surviving spouse tax free, using the unlimited marital deduction, while providing benefits not available if transferred outright.
The primary difference between the "by-pass" trust and the marital deduction trust, is that the assets of the by-pass trust are considered to pass directly from the estate of the first spouse to die to the ultimate beneficiaries at the time of the first spouse's death, even though the surviving spouse can use the
A Marital Trust often works in conjunction with a By-Pass Trust to capture the deceased spouse's estate tax exemption. By passing all assets to the surviving spouse using the unlimited marital deduction the deceased spouse's federal and state estate tax exemption is basically lost.