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 Georgia Marital Deduction Trust, also known as a Bypass Trust, is a type of estate planning trust used in the state of Georgia to minimize estate taxes and provide financial security for surviving spouses. This trust is created by a married couple to take advantage of the marital deduction, allowing the transfer of assets from one spouse to another upon death without incurring estate tax. Trust A, also referred to as the Marital Trust or the A Trust, is established to hold assets up to the value of the federal estate tax exemption. Upon the death of one spouse, the assets are transferred to Trust A, which is solely for the benefit of the surviving spouse during their lifetime. The surviving spouse has the right to use the income and, in some cases, principal as well. However, the surviving spouse does not have the power to amend or distribute the principal, ensuring that these assets are ultimately preserved for the couple's heirs. Bypass Trust B, also called the Credit Shelter Trust or the B Trust, is designed to utilize the deceased spouse's federal estate tax exemption amount. It allows assets equal to this exemption to be transferred to the trust upon the first spouse's death, rather than passing directly to the surviving spouse. This transfer helps ensure that the exemption is fully utilized and not wasted. The surviving spouse can receive income from Trust B, and in certain cases, even access to the principal, but the assets held in this trust are not included in their taxable estate upon their death. There are variations of Georgia Marital Deduction Trusts based on individual circumstances and the specific goals of the estate planning. Some other types include Qualified Terminable Interest Property trusts (TIP trusts), which provide income to the surviving spouse while preserving the principal for the ultimate beneficiaries, and Charitable Marital Deduction Trusts, which combine the benefits of the marital deduction with charitable giving. In summary, the Georgia Marital Deduction Trust, featuring Trust A and Bypass Trust B, is a comprehensive estate planning tool that allows married couples in Georgia to minimize estate taxes, protect assets, and ensure the financial well-being of the surviving spouse. By utilizing different types of marital deduction trusts based on specific needs, individuals can tailor their estate plans to maximize tax advantages and achieve their desired distribution of assets.
