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.
The Nevada Marital Deduction Trust is an essential estate planning tool designed to provide benefits to surviving spouses while maximizing tax savings. It consists of two essential components: Trust A, commonly known as the Marital Trust, and Trust B, known as the Bypass Trust. Let's delve deeper into each trust and explore their unique features and benefits. 1. Nevada Marital Deduction Trust — Trust A: Trust A, also referred to as the Marital Trust or A Trust, is created to provide for the surviving spouse upon the death of the granter. It allows the granter to leave assets in a trust for their spouse without incurring any estate taxes upon the granter's passing. The surviving spouse can enjoy income from the trust's assets, and depending on the specific provisions, may also have access to principal funds for their needs. Trust A ensures that the surviving spouse is adequately provided for during their lifetime. Some types of Marital Trusts within Nevada estate planning include: — Revocable Marital Deduction Trust: Allows the granter to retain control over the assets in the trust during their lifetime and provides flexibility in making changes or amendments. — Irrevocable Marital Deduction Trust: Offers tax advantages by removing the assets from the granter's taxable estate, potentially reducing estate taxes upon the death of the surviving spouse. 2. Nevada Marital Deduction Trust — Trust B: Trust B, also known as the Bypass Trust or B Trust, complements Trust A and offers significant estate tax benefits for the granter's heirs. It ensures that some of the granter's assets pass directly to their chosen beneficiaries, other than the surviving spouse. By utilizing the federal estate tax exemption, Trust B shields a portion of the granter's assets from future estate taxes upon the surviving spouse's death. While the surviving spouse may receive income from Trust B, they typically do not have direct control over the assets within this trust. Different types of Bypass Trusts in Nevada estate planning include: — AB Trust: A commonly used technique where, upon the first spouse's death, the assets are divided into the Marital Trust (Trust A) and the Bypass Trust (Trust B), optimizing estate tax savings. TIPIP Trust: Qualified Terminal Interest Property Trust allows the granter to provide for a surviving spouse while maintaining control over the ultimate distribution of assets to other beneficiaries, such as children from a previous marriage. In summary, Nevada Marital Deduction Trusts A and B offer valuable estate planning solutions for married couples seeking to minimize estate taxes and provide for their loved ones. By capitalizing on these trust structures, individuals can protect their assets, ensure spousal support, and leave a financial legacy for future generations. Consulting with an experienced estate planning attorney is crucial to tailor these trusts to individual needs and ensure compliance with Nevada state laws.
