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 Virginia Marital Deduction Trust is a type of trust that allows married couples to minimize estate tax or inheritance tax upon the death of one spouse. The trust is designed to take advantage of the marital deduction, which allows for the tax-free transfer of assets between spouses. Trust A, also known as the Marital Deduction Trust, is created upon the death of the first spouse. This trust holds assets equal to or less than the federal estate tax exemption amount and qualifies for the marital deduction. The surviving spouse is the primary beneficiary of Trust A and has the right to access income and principal as needed for their support and well-being. Bypass Trust B, also referred to as the Family Trust, Credit Shelter Trust, or the B Trust, is also established upon the death of the first spouse. This trust holds assets that are the maximum amount allowed by the federal estate tax exemption. Unlike Trust A, the surviving spouse does not have unlimited access to the principal of Trust B but is still entitled to the income generated by the trust. The beneficiaries of Trust B are typically the children or other designated heirs. By dividing assets into Trust A and Trust B, the marital deduction trust strategy aims to reduce or eliminate estate taxes on the passing of both spouses. Upon the death of the surviving spouse, the assets of both trusts can pass to the beneficiaries free of estate tax, subject to any changes in tax laws. It is important to note that the specific terms and provisions of a Virginia Marital Deduction Trust can vary depending on individual circumstances and the estate planning goals of the couple. Consulting with an experienced estate planning attorney familiar with Virginia laws is crucial to create a comprehensive plan tailored to your needs. Other potential variations of Virginia Marital Deduction Trusts might include the TIP Trust, the Qualified Personnel Residence Trust (PRT), or the Charitable Remainder Trust (CRT). These trusts serve different purposes and may be used in combination with Trust A and Trust B to optimize estate planning strategies and further reduce tax liabilities. In summary, a Virginia Marital Deduction Trust — Trust A and Bypass Trust B are estate planning tools that married couples can utilize to minimize estate taxes upon the death of one spouse. These trusts divide assets and allow for tax-free transfers between spouses while optimizing tax savings. The specific type of marital deduction trust, such as TIP Trust, PRT, or CRT, would depend on the couple's unique circumstances and estate planning goals.
