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.
Arkansas Marital Deduction Trust, also known as Trust A, is a type of trust that allows married individuals to transfer property to their spouses upon their death without incurring estate taxes. This trust is established to take advantage of the marital deduction, a provision in the tax code that permits taxpayers to transfer an unlimited amount of assets to their spouses tax-free. The purpose of Trust A is to ensure that the surviving spouse has sufficient income and resources to maintain their lifestyle after the death of their partner. The assets placed in Trust A are usually income-producing, such as investments, real estate, or business interests. The surviving spouse is entitled to all income generated by Trust A during their lifetime, and in some cases, they may also have the right to access the principal if needed for their support. Upon the death of the surviving spouse, any remaining assets held in Trust A will pass to the named beneficiaries, typically the children or other designated individuals. This allows the couple to provide for their children or other loved ones while still taking advantage of the marital deduction and minimizing estate taxes. Bypass Trust B, also referred to as a credit shelter trust or family trust, is another type of trust commonly used in Arkansas estate planning. Bypass Trust B works in conjunction with Trust A to maximize the available estate tax exemptions of both spouses. When the first spouse passes away, the assets that exceed their estate tax exemption are transferred to Bypass Trust B instead of going directly to the surviving spouse. By doing so, these excess assets are effectively "bypassing" the surviving spouse's estate and are not subject to estate taxes upon their death. Typically, the surviving spouse is entitled to any income generated by the assets in Bypass Trust B, and they may also have the right to access the principal under certain circumstances. The primary purpose of Bypass Trust B is to preserve the deceased spouse's estate tax exemption and ensure that it is not wasted. By segregating assets in this trust, the couple can pass down a greater portion of their wealth to their beneficiaries while reducing their overall estate tax liability. It is important to note that the specific terms and provisions of Arkansas Marital Deduction Trusts — Trust A and Bypass Trust B may vary widely based on individual circumstances, financial goals, and estate planning objectives. Seeking the guidance of an experienced estate planning attorney is crucial to ensure that these trusts are tailored to meet your specific needs and objectives.Arkansas Marital Deduction Trust, also known as Trust A, is a type of trust that allows married individuals to transfer property to their spouses upon their death without incurring estate taxes. This trust is established to take advantage of the marital deduction, a provision in the tax code that permits taxpayers to transfer an unlimited amount of assets to their spouses tax-free. The purpose of Trust A is to ensure that the surviving spouse has sufficient income and resources to maintain their lifestyle after the death of their partner. The assets placed in Trust A are usually income-producing, such as investments, real estate, or business interests. The surviving spouse is entitled to all income generated by Trust A during their lifetime, and in some cases, they may also have the right to access the principal if needed for their support. Upon the death of the surviving spouse, any remaining assets held in Trust A will pass to the named beneficiaries, typically the children or other designated individuals. This allows the couple to provide for their children or other loved ones while still taking advantage of the marital deduction and minimizing estate taxes. Bypass Trust B, also referred to as a credit shelter trust or family trust, is another type of trust commonly used in Arkansas estate planning. Bypass Trust B works in conjunction with Trust A to maximize the available estate tax exemptions of both spouses. When the first spouse passes away, the assets that exceed their estate tax exemption are transferred to Bypass Trust B instead of going directly to the surviving spouse. By doing so, these excess assets are effectively "bypassing" the surviving spouse's estate and are not subject to estate taxes upon their death. Typically, the surviving spouse is entitled to any income generated by the assets in Bypass Trust B, and they may also have the right to access the principal under certain circumstances. The primary purpose of Bypass Trust B is to preserve the deceased spouse's estate tax exemption and ensure that it is not wasted. By segregating assets in this trust, the couple can pass down a greater portion of their wealth to their beneficiaries while reducing their overall estate tax liability. It is important to note that the specific terms and provisions of Arkansas Marital Deduction Trusts — Trust A and Bypass Trust B may vary widely based on individual circumstances, financial goals, and estate planning objectives. Seeking the guidance of an experienced estate planning attorney is crucial to ensure that these trusts are tailored to meet your specific needs and objectives.
