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.
A Colorado Marital Deduction Trust, also known as Trust A or Bypass Trust B, is a type of trust that is established by married couples to minimize estate taxes upon the death of one of the spouses. It is commonly used as an estate planning tool in the state of Colorado. Trust A, also known as the Marital Deduction Trust, is created to take advantage of the unlimited marital deduction. This deduction allows a spouse to transfer an unlimited amount of assets to the surviving spouse without incurring any gift or estate taxes. Trust A is specifically designed to hold the assets of the deceased spouse and provide income and support to the surviving spouse during their lifetime. Bypass Trust B, also known as the Family Trust or Credit Shelter Trust, is created to maximize the use of the deceased spouse's federal estate tax exemption. This exemption is the amount of assets that can be transferred tax-free at the time of death. By placing assets in the Bypass Trust B, the deceased spouse's exemption is fully utilized, which helps reduce the overall estate tax liability. Both Trust A and Bypass Trust B are irrevocable trusts, meaning that once they are created, the terms cannot be changed. They are funded with assets such as cash, real estate, life insurance policies, and investments. The assets in these trusts are not subject to probate and can be passed on to the heirs according to the predetermined instructions set by the couple. There are various types of Colorado Marital Deduction Trusts, each designed to meet specific needs and circumstances of the couple. Some variations include: 1. Qualified Terminable Interest Property (TIP) Trust: This type of trust allows the deceased spouse to provide income for the surviving spouse while ensuring that the remaining assets are eventually distributed to other beneficiaries, such as children or grandchildren. 2. Charitable Marital Deduction Trust: This trust allows the surviving spouse to receive income from the trust assets during their lifetime, with the remainder of the assets going to a charitable organization upon their death. 3. Marital Deduction Portability Trust: With the introduction of portability rules, this trust takes advantage of unused exemption amounts from the deceased spouse by transferring those amounts to the surviving spouse. This helps maximize the overall estate tax exemption for the couple. It is essential to consult with an experienced estate planning attorney or financial advisor when considering the implementation of a Colorado Marital Deduction Trust. They can guide individuals through the process and ensure that the trust structure aligns with their unique financial goals and preferences.A Colorado Marital Deduction Trust, also known as Trust A or Bypass Trust B, is a type of trust that is established by married couples to minimize estate taxes upon the death of one of the spouses. It is commonly used as an estate planning tool in the state of Colorado. Trust A, also known as the Marital Deduction Trust, is created to take advantage of the unlimited marital deduction. This deduction allows a spouse to transfer an unlimited amount of assets to the surviving spouse without incurring any gift or estate taxes. Trust A is specifically designed to hold the assets of the deceased spouse and provide income and support to the surviving spouse during their lifetime. Bypass Trust B, also known as the Family Trust or Credit Shelter Trust, is created to maximize the use of the deceased spouse's federal estate tax exemption. This exemption is the amount of assets that can be transferred tax-free at the time of death. By placing assets in the Bypass Trust B, the deceased spouse's exemption is fully utilized, which helps reduce the overall estate tax liability. Both Trust A and Bypass Trust B are irrevocable trusts, meaning that once they are created, the terms cannot be changed. They are funded with assets such as cash, real estate, life insurance policies, and investments. The assets in these trusts are not subject to probate and can be passed on to the heirs according to the predetermined instructions set by the couple. There are various types of Colorado Marital Deduction Trusts, each designed to meet specific needs and circumstances of the couple. Some variations include: 1. Qualified Terminable Interest Property (TIP) Trust: This type of trust allows the deceased spouse to provide income for the surviving spouse while ensuring that the remaining assets are eventually distributed to other beneficiaries, such as children or grandchildren. 2. Charitable Marital Deduction Trust: This trust allows the surviving spouse to receive income from the trust assets during their lifetime, with the remainder of the assets going to a charitable organization upon their death. 3. Marital Deduction Portability Trust: With the introduction of portability rules, this trust takes advantage of unused exemption amounts from the deceased spouse by transferring those amounts to the surviving spouse. This helps maximize the overall estate tax exemption for the couple. It is essential to consult with an experienced estate planning attorney or financial advisor when considering the implementation of a Colorado Marital Deduction Trust. They can guide individuals through the process and ensure that the trust structure aligns with their unique financial goals and preferences.
