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.
Illinois Marital Deduction Trust (Trust A) and Bypass Trust (Trust B) are important estate planning tools used by residents of Illinois to preserve wealth, minimize estate taxes, and provide for the surviving spouse and other beneficiaries. Let's delve into each trust type and understand their distinct features and benefits. 1. Illinois Marital Deduction Trust (Trust A): The Illinois Marital Deduction Trust, also known as Trust A, is established to take advantage of the unlimited marital deduction allowed by the Internal Revenue Code (IRC). It enables married couples to transfer assets to each other without incurring federal estate taxes upon the first spouse's death. Key Features: — Married couples establish Trust A to maintain control over their assets and defer estate taxes. — Upon the death of the first spouse, assets are transferred into Trust A for the benefit of the surviving spouse. — The surviving spouse receives income generated by the trust assets and may have limited access to the principal. — Trust A qualifies for the unlimited marital deduction, meaning there are no estate taxes due upon the first spouse's death. — However, it is important to note that estate taxes may be applicable upon the surviving spouse's death or distribution of assets to other beneficiaries. 2. Bypass Trust (Trust B): The Bypass Trust, also known as Trust B or Credit Shelter Trust, complements Trust A and is designed to maximize the preservation of wealth across generations by utilizing both spouses' estate tax exemptions. Trust B is typically funded with an amount not exceeding the estate tax exemption amount, which is determined by federal law. Key Features: — Trust B prevents the estate tax exemption of the first spouse to die from being wasted. — Upon the death of the first spouse, assets up to the current estate tax exemption limit are transferred into Trust B rather than Trust A. — Trust B can benefit the surviving spouse, who may receive income from the trust assets and potentially access the principal for specific needs. — The remaining assets outside the estate tax exemption amount can be allocated to Trust A, qualifying for the unlimited marital deduction. — By utilizing both spouses' estate tax exemptions, Trust B helps maximize wealth transfer across generations by reducing estate taxes on both spouses' estates. Different Types of Illinois Marital Deduction Trusts: While Trust A and Trust B are the most commonly used trusts, it's worth mentioning that the specific terms and provisions may vary depending on individual circumstances and estate planning goals. These trusts can be customized to suit specific needs, incorporating provisions such as special needs trusts, qualified terminable interest property (TIP) trusts, or discretionary trusts to accommodate diverse familial and financial situations. In conclusion, Illinois Marital Deduction Trust (Trust A) and Bypass Trust (Trust B) are crucial components of estate planning in Illinois. Trust A utilizes the unlimited marital deduction to postpone estate taxes until the surviving spouse's death, while Trust B maximizes wealth transfer by utilizing both spouses' estate tax exemptions. By working closely with an experienced estate planning attorney, individuals can develop a comprehensive plan that aligns with their goals, minimizes tax liability, and ensures the secure transfer of assets to their loved ones.Illinois Marital Deduction Trust (Trust A) and Bypass Trust (Trust B) are important estate planning tools used by residents of Illinois to preserve wealth, minimize estate taxes, and provide for the surviving spouse and other beneficiaries. Let's delve into each trust type and understand their distinct features and benefits. 1. Illinois Marital Deduction Trust (Trust A): The Illinois Marital Deduction Trust, also known as Trust A, is established to take advantage of the unlimited marital deduction allowed by the Internal Revenue Code (IRC). It enables married couples to transfer assets to each other without incurring federal estate taxes upon the first spouse's death. Key Features: — Married couples establish Trust A to maintain control over their assets and defer estate taxes. — Upon the death of the first spouse, assets are transferred into Trust A for the benefit of the surviving spouse. — The surviving spouse receives income generated by the trust assets and may have limited access to the principal. — Trust A qualifies for the unlimited marital deduction, meaning there are no estate taxes due upon the first spouse's death. — However, it is important to note that estate taxes may be applicable upon the surviving spouse's death or distribution of assets to other beneficiaries. 2. Bypass Trust (Trust B): The Bypass Trust, also known as Trust B or Credit Shelter Trust, complements Trust A and is designed to maximize the preservation of wealth across generations by utilizing both spouses' estate tax exemptions. Trust B is typically funded with an amount not exceeding the estate tax exemption amount, which is determined by federal law. Key Features: — Trust B prevents the estate tax exemption of the first spouse to die from being wasted. — Upon the death of the first spouse, assets up to the current estate tax exemption limit are transferred into Trust B rather than Trust A. — Trust B can benefit the surviving spouse, who may receive income from the trust assets and potentially access the principal for specific needs. — The remaining assets outside the estate tax exemption amount can be allocated to Trust A, qualifying for the unlimited marital deduction. — By utilizing both spouses' estate tax exemptions, Trust B helps maximize wealth transfer across generations by reducing estate taxes on both spouses' estates. Different Types of Illinois Marital Deduction Trusts: While Trust A and Trust B are the most commonly used trusts, it's worth mentioning that the specific terms and provisions may vary depending on individual circumstances and estate planning goals. These trusts can be customized to suit specific needs, incorporating provisions such as special needs trusts, qualified terminable interest property (TIP) trusts, or discretionary trusts to accommodate diverse familial and financial situations. In conclusion, Illinois Marital Deduction Trust (Trust A) and Bypass Trust (Trust B) are crucial components of estate planning in Illinois. Trust A utilizes the unlimited marital deduction to postpone estate taxes until the surviving spouse's death, while Trust B maximizes wealth transfer by utilizing both spouses' estate tax exemptions. By working closely with an experienced estate planning attorney, individuals can develop a comprehensive plan that aligns with their goals, minimizes tax liability, and ensures the secure transfer of assets to their loved ones.
Para su conveniencia, debajo del texto en español le brindamos la versión completa de este formulario en inglés. For your convenience, the complete English version of this form is attached below the Spanish version.
