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.
Arizona Marital Deduction Trust, also known as Trust A, is a legal arrangement that provides financial protection and tax benefits for married couples in the state of Arizona. This trust is specifically designed to maximize the assets that are passed on to the surviving spouse after one of them passes away. Trust A allows the deceased spouse's assets to be transferred into the trust, ensuring that the surviving spouse receives the maximum benefit from the estate. By utilizing the marital deduction, there is a reduction in the amount of estate tax that needs to be paid, as the assets in Trust A are considered to be a marital gift. Furthermore, Trust A also allows the surviving spouse to access the income generated by the trust assets, ensuring their financial security while preserving the principal for the beneficiaries named in the trust. This trust provides flexibility and control, as the surviving spouse has the ability to modify or terminate the trust at any point during their lifetime. On the other hand, Bypass Trust B, also referred to as a Credit Shelter Trust, is established as part of the estate planning process to maximize the utilization of both spouses' estate tax exemptions. This trust allows for the transfer and preservation of assets, up to the maximum exempt amount, for the benefit of future generations. With Bypass Trust B, the assets in the trust are typically not subject to estate tax upon the surviving spouse's death. This ensures that the assets are protected and can continue to grow, providing financial benefits to subsequent generations. The income generated by the trust assets can also be accessed by the surviving spouse, ensuring their financial stability during their lifetime. In addition to Trust A and Bypass Trust B, there are various types of marital deduction trusts available in Arizona. These may include Qualified Terminal Interest Property (TIP) Trust, Qualified Personnel Residence Trust (PRT), Charitable Remainder Trust (CRT), and Generation-Skipping Trust (GST). Overall, Arizona Marital Deduction Trust — Trust A and Bypass Trust B are essential components of estate plans for married couples in Arizona. These trusts provide tax benefits, financial protection, and flexibility in managing assets, ensuring the financial stability and well-being of both spouses and future generations.
