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.
Keywords: Nebraska Marital Deduction Trust, Trust A, Bypass Trust B, estate planning, marital deduction, tax-efficient, asset protection, spousal inheritance, trust types, financial security Nebraska Marital Deduction Trust Overview: A Nebraska Marital Deduction Trust is a specialized estate planning tool that helps married couples ensure the tax-efficient transfer of their assets while also providing for the financial security and protection of their spouse. It involves the creation of two trusts: Trust A (also known as the Marital Trust) and Bypass Trust B (also known as the Family Trust or Credit Shelter Trust). Trust A (Marital Trust): Trust A is a component of the Nebraska Marital Deduction Trust specifically designed to benefit the surviving spouse. It allows the deceased's assets to be transferred to a trust that provides financial support and other benefits to the surviving spouse while still qualifying for the marital deduction. This deduction lowers the overall taxable estate value, minimizing or eliminating estate taxes, and thus preserving the wealth for the benefit of the surviving spouse and future generations. Bypass Trust B (Family Trust or Credit Shelter Trust): Bypass Trust B, the second component of the Nebraska Marital Deduction Trust, is established to hold and protect the deceased's assets for the benefit of future generations, typically children or other heirs. The purpose of this trust is to fully utilize the deceased spouse's available estate tax exemption amount, avoiding unnecessary tax liability. Assets placed in the Bypass Trust B do not fully qualify for the marital deduction because they are intended for heirs rather than the surviving spouse. Types of Nebraska Marital Deduction Trust: 1. Qualified Terminable Interest Property (TIP) Trust: This type of Trust A is commonly used when the surviving spouse may require additional financial support or care. It provides income and certain distributions to the surviving spouse, while ensuring that any remaining trust assets ultimately pass to the beneficiaries specified by the deceased spouse. 2. General Power of Appointment Trust: This variation of Trust A allows the surviving spouse to have broad discretion in deciding how trust assets will be distributed among the beneficiaries, including themselves. It offers flexibility in estate planning by allowing the surviving spouse to adapt to changing circumstances, needs, and priorities. Benefits and Importance: — Asset Protection: Both Trust A and Bypass Trust B offer a level of asset protection, shielding the assets from potential creditors and legal claims. — Tax Efficiency: By utilizing the marital deduction, couples can minimize estate taxes and maximize the wealth left to their heirs. — Spousal Inheritance: The Nebraska Marital Deduction Trust ensures the surviving spouse is provided for while also protecting the deceased spouse's intended distribution to their heirs. — Financial Security: By establishing Trust A, the surviving spouse can rely on a regular stream of income and potential distributions during their lifetime, ensuring their financial stability. In summary, the Nebraska Marital Deduction Trust, consisting of Trust A and Bypass Trust B, is an effective estate planning strategy for married couples in Nebraska. It allows for the preservation of wealth, reduction of tax burdens, and ensuring the financial security of the surviving spouse while protecting assets for future generations. Depending on the specific circumstances and goals of the couple, variations such as Qualified Terminable Interest Property (TIP) Trust or General Power of Appointment Trust can be chosen to tailor the trust structure to their preferences.Keywords: Nebraska Marital Deduction Trust, Trust A, Bypass Trust B, estate planning, marital deduction, tax-efficient, asset protection, spousal inheritance, trust types, financial security Nebraska Marital Deduction Trust Overview: A Nebraska Marital Deduction Trust is a specialized estate planning tool that helps married couples ensure the tax-efficient transfer of their assets while also providing for the financial security and protection of their spouse. It involves the creation of two trusts: Trust A (also known as the Marital Trust) and Bypass Trust B (also known as the Family Trust or Credit Shelter Trust). Trust A (Marital Trust): Trust A is a component of the Nebraska Marital Deduction Trust specifically designed to benefit the surviving spouse. It allows the deceased's assets to be transferred to a trust that provides financial support and other benefits to the surviving spouse while still qualifying for the marital deduction. This deduction lowers the overall taxable estate value, minimizing or eliminating estate taxes, and thus preserving the wealth for the benefit of the surviving spouse and future generations. Bypass Trust B (Family Trust or Credit Shelter Trust): Bypass Trust B, the second component of the Nebraska Marital Deduction Trust, is established to hold and protect the deceased's assets for the benefit of future generations, typically children or other heirs. The purpose of this trust is to fully utilize the deceased spouse's available estate tax exemption amount, avoiding unnecessary tax liability. Assets placed in the Bypass Trust B do not fully qualify for the marital deduction because they are intended for heirs rather than the surviving spouse. Types of Nebraska Marital Deduction Trust: 1. Qualified Terminable Interest Property (TIP) Trust: This type of Trust A is commonly used when the surviving spouse may require additional financial support or care. It provides income and certain distributions to the surviving spouse, while ensuring that any remaining trust assets ultimately pass to the beneficiaries specified by the deceased spouse. 2. General Power of Appointment Trust: This variation of Trust A allows the surviving spouse to have broad discretion in deciding how trust assets will be distributed among the beneficiaries, including themselves. It offers flexibility in estate planning by allowing the surviving spouse to adapt to changing circumstances, needs, and priorities. Benefits and Importance: — Asset Protection: Both Trust A and Bypass Trust B offer a level of asset protection, shielding the assets from potential creditors and legal claims. — Tax Efficiency: By utilizing the marital deduction, couples can minimize estate taxes and maximize the wealth left to their heirs. — Spousal Inheritance: The Nebraska Marital Deduction Trust ensures the surviving spouse is provided for while also protecting the deceased spouse's intended distribution to their heirs. — Financial Security: By establishing Trust A, the surviving spouse can rely on a regular stream of income and potential distributions during their lifetime, ensuring their financial stability. In summary, the Nebraska Marital Deduction Trust, consisting of Trust A and Bypass Trust B, is an effective estate planning strategy for married couples in Nebraska. It allows for the preservation of wealth, reduction of tax burdens, and ensuring the financial security of the surviving spouse while protecting assets for future generations. Depending on the specific circumstances and goals of the couple, variations such as Qualified Terminable Interest Property (TIP) Trust or General Power of Appointment Trust can be chosen to tailor the trust structure to their preferences.
