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 Missouri marital deduction trust, commonly referred to as Trust A and Bypass Trust B, is a type of trust designed to manage and distribute assets for married couples in the state of Missouri in a tax-efficient manner. This trust structure helps maximize estate tax savings and ensures that the surviving spouse is adequately provided for while also preserving assets for future generations. Trust A, also known as the marital deduction trust, is created to take advantage of the unlimited marital deduction. This deduction allows for tax-free transfers of assets from one spouse to another upon death. By placing assets in Trust A, the deceased spouse's estate tax exemption can be fully utilized, reducing or eliminating estate taxes upon their death. The surviving spouse is the primary beneficiary of Trust A and has the right to receive income generated by the trust assets during their lifetime. They also have the power to invade principal for their health, education, maintenance, and support. Bypass Trust B, also known as the credit shelter trust or family trust, is established to make use of the deceased spouse's estate tax exemption. Assets up to the exemption amount are placed in Trust B, thereby bypassing the surviving spouse's estate and avoiding estate taxes on those assets upon their death. The surviving spouse is not the primary beneficiary of Trust B, although they may receive income from the trust. The primary beneficiaries are often the couple's children or other designated beneficiaries. The assets held in Trust B can grow and be distributed to the beneficiaries outside the surviving spouse's taxable estate. Additionally, there are different types of Missouri marital deduction trusts that can be customized to meet the specific needs and goals of the couple. Some variants include: 1. Qualified Terminable Interest Property Trust (TIP Trust): This type of marital deduction trust is often used in second marriages when there are children from previous relationships. It allows the granter to provide income and support for the surviving spouse while ensuring that the remaining trust assets pass to the intended beneficiaries, typically the granter's children. 2. Irrevocable Life Insurance Trust (IIT): This trust is designed to hold life insurance policies outside the insured's taxable estate. It can be structured as a marital deduction trust to provide for the surviving spouse while preserving the insurance proceeds for future beneficiaries. 3. Generation-Skipping Trust: This trust is utilized when the granter wants to transfer wealth directly to grandchildren or future generations while avoiding estate taxes at each generational transfer. It can be designed as a marital deduction trust to provide for the surviving spouse during their lifetime while ultimately benefiting grandchildren or later descendants. In conclusion, a Missouri marital deduction trust (Trust A) and Bypass Trust (Trust B) are estate planning tools that help minimize estate taxes and provide for the surviving spouse while preserving assets for future generations. Various options and variations exist, such as TIP trusts, Slits, and generation-skipping trusts, enabling couples to tailor their estate plans according to their unique circumstances and objectives.A Missouri marital deduction trust, commonly referred to as Trust A and Bypass Trust B, is a type of trust designed to manage and distribute assets for married couples in the state of Missouri in a tax-efficient manner. This trust structure helps maximize estate tax savings and ensures that the surviving spouse is adequately provided for while also preserving assets for future generations. Trust A, also known as the marital deduction trust, is created to take advantage of the unlimited marital deduction. This deduction allows for tax-free transfers of assets from one spouse to another upon death. By placing assets in Trust A, the deceased spouse's estate tax exemption can be fully utilized, reducing or eliminating estate taxes upon their death. The surviving spouse is the primary beneficiary of Trust A and has the right to receive income generated by the trust assets during their lifetime. They also have the power to invade principal for their health, education, maintenance, and support. Bypass Trust B, also known as the credit shelter trust or family trust, is established to make use of the deceased spouse's estate tax exemption. Assets up to the exemption amount are placed in Trust B, thereby bypassing the surviving spouse's estate and avoiding estate taxes on those assets upon their death. The surviving spouse is not the primary beneficiary of Trust B, although they may receive income from the trust. The primary beneficiaries are often the couple's children or other designated beneficiaries. The assets held in Trust B can grow and be distributed to the beneficiaries outside the surviving spouse's taxable estate. Additionally, there are different types of Missouri marital deduction trusts that can be customized to meet the specific needs and goals of the couple. Some variants include: 1. Qualified Terminable Interest Property Trust (TIP Trust): This type of marital deduction trust is often used in second marriages when there are children from previous relationships. It allows the granter to provide income and support for the surviving spouse while ensuring that the remaining trust assets pass to the intended beneficiaries, typically the granter's children. 2. Irrevocable Life Insurance Trust (IIT): This trust is designed to hold life insurance policies outside the insured's taxable estate. It can be structured as a marital deduction trust to provide for the surviving spouse while preserving the insurance proceeds for future beneficiaries. 3. Generation-Skipping Trust: This trust is utilized when the granter wants to transfer wealth directly to grandchildren or future generations while avoiding estate taxes at each generational transfer. It can be designed as a marital deduction trust to provide for the surviving spouse during their lifetime while ultimately benefiting grandchildren or later descendants. In conclusion, a Missouri marital deduction trust (Trust A) and Bypass Trust (Trust B) are estate planning tools that help minimize estate taxes and provide for the surviving spouse while preserving assets for future generations. Various options and variations exist, such as TIP trusts, Slits, and generation-skipping trusts, enabling couples to tailor their estate plans according to their unique circumstances and objectives.
