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 Delaware Marital Deduction Trust, also known as a TIP trust (Qualified Terminable Interest Property trust), is an estate planning tool designed to provide financial stability and tax benefits for married couples. This trust allows the transfer of assets from the deceased spouse to the surviving spouse while reducing estate taxes. Trust A, also known as the Marital Trust or "A" Trust, is the portion of the Delaware Marital Deduction Trust that receives assets upon the death of the first spouse. This trust provides income for the surviving spouse during their lifetime and ensures that the assets are protected and distributed according to the deceased spouse's wishes. Trust B, also known as the Bypass Trust, Credit Shelter Trust, or "B" Trust, is the portion of the Delaware Marital Deduction Trust that is set aside for the benefit of the surviving spouse and the couple's heirs. The key purpose of Trust B is to preserve the unused portion of the deceased spouse's federal estate tax exemption, thereby reducing potential estate taxes when the surviving spouse passes away. There are different types of Delaware Marital Deduction Trusts based on their structure and tax implications. Some common types include: 1. General Power of Appointment TIP Trust: This type of trust gives the surviving spouse the power to distribute assets among themselves or to the heirs upon their death, providing flexibility and control. 2. Qualified Domestic Trust (DOT): This trust is used when one spouse is a non-U.S. citizen. It allows the non-citizen spouse to receive a marital deduction for estate tax purposes while ensuring that estate taxes are paid upon distribution to non-citizen heirs. 3. Qualified Personnel Residence Trust (PRT): A PRT is a specific type of trust that allows the deceased spouse to transfer their primary residence or vacation home to the trust, reducing the taxable value of the estate. 4. Dynasty Trust: This trust is created to last for multiple generations, allowing assets to be sheltered from estate taxes for an extended period. It is typically used to protect substantial wealth and provide for future generations. In conclusion, a Delaware Marital Deduction Trust, comprising Trust A and Bypass Trust B, is a valuable tool for married couples to minimize estate taxes and provide financial security for the surviving spouse and their heirs. Understanding the different types of trusts available within this framework can help individuals tailor their estate plans according to their unique circumstances and goals.A Delaware Marital Deduction Trust, also known as a TIP trust (Qualified Terminable Interest Property trust), is an estate planning tool designed to provide financial stability and tax benefits for married couples. This trust allows the transfer of assets from the deceased spouse to the surviving spouse while reducing estate taxes. Trust A, also known as the Marital Trust or "A" Trust, is the portion of the Delaware Marital Deduction Trust that receives assets upon the death of the first spouse. This trust provides income for the surviving spouse during their lifetime and ensures that the assets are protected and distributed according to the deceased spouse's wishes. Trust B, also known as the Bypass Trust, Credit Shelter Trust, or "B" Trust, is the portion of the Delaware Marital Deduction Trust that is set aside for the benefit of the surviving spouse and the couple's heirs. The key purpose of Trust B is to preserve the unused portion of the deceased spouse's federal estate tax exemption, thereby reducing potential estate taxes when the surviving spouse passes away. There are different types of Delaware Marital Deduction Trusts based on their structure and tax implications. Some common types include: 1. General Power of Appointment TIP Trust: This type of trust gives the surviving spouse the power to distribute assets among themselves or to the heirs upon their death, providing flexibility and control. 2. Qualified Domestic Trust (DOT): This trust is used when one spouse is a non-U.S. citizen. It allows the non-citizen spouse to receive a marital deduction for estate tax purposes while ensuring that estate taxes are paid upon distribution to non-citizen heirs. 3. Qualified Personnel Residence Trust (PRT): A PRT is a specific type of trust that allows the deceased spouse to transfer their primary residence or vacation home to the trust, reducing the taxable value of the estate. 4. Dynasty Trust: This trust is created to last for multiple generations, allowing assets to be sheltered from estate taxes for an extended period. It is typically used to protect substantial wealth and provide for future generations. In conclusion, a Delaware Marital Deduction Trust, comprising Trust A and Bypass Trust B, is a valuable tool for married couples to minimize estate taxes and provide financial security for the surviving spouse and their heirs. Understanding the different types of trusts available within this framework can help individuals tailor their estate plans according to their unique circumstances and goals.
