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.
New Jersey Marital Deduction Trust: The New Jersey Marital Deduction Trust, also known as Trust A, is a type of trust created by married couples in New Jersey as part of their estate planning strategy. This trust is specifically designed to take advantage of the marital deduction, which allows for the deferral of estate taxes on assets transferred between spouses. Trust A is typically established upon the death of the first spouse. The surviving spouse becomes the beneficiary of the trust, and they have the right to receive income generated by the trust assets during their lifetime. They may also have the power to withdraw principal from the trust for their health, education, maintenance, and support. Upon the surviving spouse's death, the assets held in Trust A are then distributed according to the terms outlined in the trust document. This may include passing on to the couple's children, other family members, or charitable organizations. Since the trust assets have been excluded from the surviving spouse's estate, they are not subject to estate taxes. Bypass Trust B: Bypass Trust B is another type of trust commonly used in conjunction with the New Jersey Marital Deduction Trust (Trust A). Also known as a credit shelter trust or a family trust, Bypass Trust B helps maximize tax savings and protects the couple's wealth for future generations. Upon the death of the first spouse, Trust B is funded with a portion of the deceased spouse's assets up to the maximum estate tax exemption limit set by the state of New Jersey. Unlike Trust A, the surviving spouse does not have immediate access to the principal of Trust B. Instead, they may receive the income generated by the trust and potentially have limited access to the principal. One significant benefit of Bypass Trust B is that it protects the trust assets from estate taxes upon the surviving spouse's death. By utilizing the deceased spouse's estate tax exemption, these assets can pass on to heirs or beneficiaries, such as children or grandchildren, without incurring additional estate taxes. Alternatively, New Jersey Marital Deduction Trusts can also be established as Qualified Terminable Interest Property (TIP) trusts or Charitable Remainder trusts, depending on the specific objectives and preferences of the couples involved.New Jersey Marital Deduction Trust: The New Jersey Marital Deduction Trust, also known as Trust A, is a type of trust created by married couples in New Jersey as part of their estate planning strategy. This trust is specifically designed to take advantage of the marital deduction, which allows for the deferral of estate taxes on assets transferred between spouses. Trust A is typically established upon the death of the first spouse. The surviving spouse becomes the beneficiary of the trust, and they have the right to receive income generated by the trust assets during their lifetime. They may also have the power to withdraw principal from the trust for their health, education, maintenance, and support. Upon the surviving spouse's death, the assets held in Trust A are then distributed according to the terms outlined in the trust document. This may include passing on to the couple's children, other family members, or charitable organizations. Since the trust assets have been excluded from the surviving spouse's estate, they are not subject to estate taxes. Bypass Trust B: Bypass Trust B is another type of trust commonly used in conjunction with the New Jersey Marital Deduction Trust (Trust A). Also known as a credit shelter trust or a family trust, Bypass Trust B helps maximize tax savings and protects the couple's wealth for future generations. Upon the death of the first spouse, Trust B is funded with a portion of the deceased spouse's assets up to the maximum estate tax exemption limit set by the state of New Jersey. Unlike Trust A, the surviving spouse does not have immediate access to the principal of Trust B. Instead, they may receive the income generated by the trust and potentially have limited access to the principal. One significant benefit of Bypass Trust B is that it protects the trust assets from estate taxes upon the surviving spouse's death. By utilizing the deceased spouse's estate tax exemption, these assets can pass on to heirs or beneficiaries, such as children or grandchildren, without incurring additional estate taxes. Alternatively, New Jersey Marital Deduction Trusts can also be established as Qualified Terminable Interest Property (TIP) trusts or Charitable Remainder trusts, depending on the specific objectives and preferences of the couples involved.
