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.
The Harris Texas Marital Deduction Trust (Trust A) and Bypass Trust (Trust B) are estate planning tools that aim to maximize tax benefits and protect assets for married couples in the state of Texas. These trusts are commonly used to ensure the smooth transfer of assets to surviving spouses while minimizing estate taxes upon their deaths. Harris Texas Marital Deduction Trust (Trust A): Trust A, also known as the Marital Deduction Trust, is designed to provide the surviving spouse with maximum benefits while enjoying estate tax savings. When the first spouse passes away, a portion or all of their estate is transferred into Trust A. The surviving spouse can enjoy full control and access to the trust's income and principal throughout their lifetime. As the surviving spouse's assets are incorporated into the trust, estate taxes can be minimized or deferred until the second spouse's passing. Bypass Trust (Trust B): Also referred to as a Credit Shelter Trust or a Family Trust, Trust B is established alongside Trust A. Its purpose is to maximize estate tax savings by fully utilizing each spouse's federal estate tax exemption. When the first spouse dies, a portion or all of their estate is transferred into Trust B, up to the maximum exemption amount. Trust B is typically irrevocable, meaning the surviving spouse cannot modify or access its principal, but they can receive income generated by the trust. Different Types of Harris Texas Marital Deduction Trusts: 1. General Power of Appointment Trust: This type of trust allows the surviving spouse to have a general power of appointment over the trust assets, giving them the ability to allocate the trust property among beneficiaries at their discretion. 2. Qualified Terminable Interest Property (TIP) Trust: A TIP trust enables the first spouse to provide income for their surviving spouse while maintaining control over the ultimate disposition of the trust assets. This trust is commonly used when there are children from previous relationships or concerns about preserving family wealth. 3. Irrevocable Life Insurance Trust (IIT): An IIT is designed to hold life insurance policies outside the taxable estate, providing liquidity to the estate and protecting the policy's death benefit from estate taxes. 4. Dynasty Trust: This type of trust aims to establish a lasting legacy for future generations by minimizing estate taxes through multiple generations. Assets are shielded from estate tax as they pass down to future beneficiaries, potentially for several generations. In conclusion, the Harris Texas Marital Deduction Trust (Trust A) and Bypass Trust (Trust B) are versatile estate planning tools that offer married couples in Texas the opportunity to protect their assets and maximize tax benefits. Depending on individual circumstances, different types of Harris Texas Marital Deduction Trusts can further tailor the trust structures to suit specific needs and goals. It is essential to consult with an experienced estate planning attorney to determine the most suitable trust arrangement for one's particular situation.The Harris Texas Marital Deduction Trust (Trust A) and Bypass Trust (Trust B) are estate planning tools that aim to maximize tax benefits and protect assets for married couples in the state of Texas. These trusts are commonly used to ensure the smooth transfer of assets to surviving spouses while minimizing estate taxes upon their deaths. Harris Texas Marital Deduction Trust (Trust A): Trust A, also known as the Marital Deduction Trust, is designed to provide the surviving spouse with maximum benefits while enjoying estate tax savings. When the first spouse passes away, a portion or all of their estate is transferred into Trust A. The surviving spouse can enjoy full control and access to the trust's income and principal throughout their lifetime. As the surviving spouse's assets are incorporated into the trust, estate taxes can be minimized or deferred until the second spouse's passing. Bypass Trust (Trust B): Also referred to as a Credit Shelter Trust or a Family Trust, Trust B is established alongside Trust A. Its purpose is to maximize estate tax savings by fully utilizing each spouse's federal estate tax exemption. When the first spouse dies, a portion or all of their estate is transferred into Trust B, up to the maximum exemption amount. Trust B is typically irrevocable, meaning the surviving spouse cannot modify or access its principal, but they can receive income generated by the trust. Different Types of Harris Texas Marital Deduction Trusts: 1. General Power of Appointment Trust: This type of trust allows the surviving spouse to have a general power of appointment over the trust assets, giving them the ability to allocate the trust property among beneficiaries at their discretion. 2. Qualified Terminable Interest Property (TIP) Trust: A TIP trust enables the first spouse to provide income for their surviving spouse while maintaining control over the ultimate disposition of the trust assets. This trust is commonly used when there are children from previous relationships or concerns about preserving family wealth. 3. Irrevocable Life Insurance Trust (IIT): An IIT is designed to hold life insurance policies outside the taxable estate, providing liquidity to the estate and protecting the policy's death benefit from estate taxes. 4. Dynasty Trust: This type of trust aims to establish a lasting legacy for future generations by minimizing estate taxes through multiple generations. Assets are shielded from estate tax as they pass down to future beneficiaries, potentially for several generations. In conclusion, the Harris Texas Marital Deduction Trust (Trust A) and Bypass Trust (Trust B) are versatile estate planning tools that offer married couples in Texas the opportunity to protect their assets and maximize tax benefits. Depending on individual circumstances, different types of Harris Texas Marital Deduction Trusts can further tailor the trust structures to suit specific needs and goals. It is essential to consult with an experienced estate planning attorney to determine the most suitable trust arrangement for one's particular situation.
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.
