What is an AB Trust and how does it work?

What Is an AB Trust? An AB trust is a joint trust set up by a husband and wife that controls how their property is distributed after each of their deaths. The trust allows avoidance of estate tax when the first spouse dies.

What happens to my AB trust when my spouse dies?

Many times, couples leave their assets in joint accounts and this completely voids the use of the AB Trust system since the joint assets will pass outright to the surviving spouse instead of through the deceased spouse’s Last Will or Revocable Living Trust.

What are the advantages and disadvantages of an A-B trust?

1 Understanding an A-B Trust. After the death of an individual, their estate is taxed heavily before their beneficiaries receive it. 2 Advantages of an A-B Trust. The A trust contains the surviving spouse’s property interests, but they have limited control over the assets in the deceased spouse’s trust. 3 Net Worth and A-B Trusts.

What does 2021 mean for AB trusts?

This, in essence, means that in 2021 a married couple will be able to pass on up to $23.4 million on to their heirs free from federal estate taxes without the need to use AB Trust planning. So has portability of the estate tax exemption led to the extinction of AB Trusts?

What is the difference between an A/B and an Ultra Trust?

So, for the scared, there is the A/B trust and for the protected, the Ultra Trust irrevocable trust.The A/B Trust used to be one of the most popular estate planning products in a lawyer’s arsenal. Here’s how it previously worked: The first spouse dies and that spouse’s assets are placed into a trust using the first spouse’s estate tax exemption.

How much can you protect without using ab trust planning?

For example, for federal estate tax purposes, at today’s $5.49 million exemption amount, a couple can protect $10.98 million without using AB trust planning. As a result, many of your clients may want to implement this simplified approach, often working with a joint trust established by both spouses rather than two separate trusts.

What happens to an AB living trust when one spouse dies?

In an AB living trust, the surviving spouse can receive the benefits from that property in the irrevocable trust but the remainder of it goes in full to the deceased spouse’s children upon that second spouse’s death.

What happens to the surviving spouse of an irrevocable trust?

The second trust formed is a revocable one in the name of the surviving spouse. The surviving spouse is allowed to access income during the life time of the surviving spouse from the irrevocable trust, but not the principal, which will be held in trust for the beneficiaries after the remaining spouse dies.