An AB trust is a trust created by a married couple to avoid probate and minimize federal estate tax. An AB trust is created by each spouse placing property into a trust and naming someone other than his or her spouse as the final beneficiary of that trust. Upon the death of the first spouse, the surviving spouse does not own the assets in that spouse's trust outright, but has a limited power over the assets in accordance with the terms of the trust. Such powers may include the right to receive interest or income earned by the trust, to use the trust property during his or her lifetime, e.g. to live in a house, and/or to use the trust principal for his or her health, education, or support. Upon the death of the second spouse, the trust passes to the final beneficiary of the trust. For estate tax purposes, the trust is included in the first, but not the second, spouse's estate and therefore, avoids double taxation.
Tallahassee Florida Marital Deduction Trust — Trust A and Bypass Trust B are two types of trusts designed to maximize estate tax savings for married couples in Tallahassee, Florida. These trusts serve different purposes and are structured in a specific way to take advantage of the marital deduction allowed by the Internal Revenue Service (IRS). Here is a detailed description of each trust: 1. Tallahassee Florida Marital Deduction Trust A: Trust A, also known as the Marital Deduction Trust, is created to make use of the unlimited marital deduction, which allows spouses to transfer assets to each other without incurring any estate or gift taxes. The main goal of Trust A is to maximize the use of this deduction to defer estate taxes until the death of the surviving spouse. Features of Trust A: a) Surviving Spouse as Primary Beneficiary: Trust A designates the surviving spouse as the primary beneficiary of the trust. The surviving spouse is entitled to receive income generated from the trust's assets during their lifetime. b) Qualified Terminable Interest Property (TIP) Trust: Trust A qualifies as a TIP trust, ensuring that the trust assets will be included in the surviving spouse's estate upon their death. This allows for the utilization of the surviving spouse's estate tax exemption. c) Control over Distribution of Assets: Trust A provides the granter with control over the distribution of the trust's assets after the surviving spouse's death. This can be especially important for blended families or situations where the granter wants to protect assets for their children or other beneficiaries in the event of remarriage by the surviving spouse. 2. Tallahassee Florida Bypass Trust B: Bypass Trust B, also known as the Credit Shelter Trust or a Family Trust, is established to utilize both spouses' estate tax exemptions. The purpose of Trust B is to shelter a specific amount of assets from estate taxation upon the death of the first spouse. Features of Trust B: a) Irrevocable Trust: Trust B is structured as an irrevocable trust, meaning that once the assets are transferred to the trust, they cannot be reclaimed by the granter. b) Maximum Use of Estate Tax Exemptions: Trust B is designed to shelter an amount of assets up to the estate tax exemption limits for both spouses. By utilizing these exemptions at the first spouse's death, a significant amount of potential estate taxes can be avoided. c) Beneficiaries: Trust B typically names the surviving spouse and other beneficiaries, such as children or grandchildren, as the beneficiaries. The trust can provide income and principal distributions to the surviving spouse during their lifetime, while ensuring that the remaining assets pass to the ultimate beneficiaries upon the surviving spouse's death. Overall, both Trust A and Trust B are valuable estate planning tools in Tallahassee, Florida, that can offer substantial estate tax savings for married couples. It is advisable to consult with an experienced estate planning attorney or financial advisor to determine the most suitable trust structure based on individual circumstances and objectives.
