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 Wyoming Marital Deduction Trust (Trust A) and Bypass Trust (Trust B) are estate planning tools used by couples to minimize estate taxes upon the death of the first spouse. These trusts are established in Wyoming, a state known for its favorable trust laws. Let's delve into a detailed description of these trusts and discuss their different types in the context of estate planning. 1. Trust A (Wyoming Marital Deduction Trust): Trust A, also known as a Qualified Terminable Interest Property (TIP) trust, is created to qualify for the marital deduction allowed under the federal estate tax laws. The primary purpose of Trust A is to provide financial security and support for the surviving spouse while ensuring that the remaining assets pass to designated beneficiaries after their death. Keywords: Wyoming Marital Deduction Trust A, Marital Deduction, Qualified Terminable Interest Property trust, estate taxes, federal estate tax laws, financial security, designated beneficiaries. 2. Trust B (Wyoming Bypass Trust): Trust B, commonly referred to as an A/B trust or a bypass trust, is established to reduce or eliminate estate taxes upon the death of the first spouse. It allows assets equal to the federal estate tax exemption (at the time of the first spouse's death) to bypass the surviving spouse's estate, thus maximizing the use of both spouses' estate tax exemptions. Keywords: Wyoming Bypass Trust B, A/B trust, bypass trust, estate taxes, federal estate tax exemption, surviving spouse, estate tax exemptions. Different types of Wyoming Marital Deduction Trusts: a) Testamentary vs. Revocable Living Trust: Wyoming Marital Deduction Trusts can be either testamentary or revocable living trusts. A testamentary trust is created in a will and becomes effective upon the death of the testator, while a revocable living trust is established during the lifetime of the granter and can be modified or revoked. Keywords: Testamentary trust, Revocable living trust, granter, testator, effective upon death. b) General Power of Appointment Trust: Under this variant, the surviving spouse has a general power of appointment over the trust assets. This means they have the authority to allocate the trust's assets to themselves, their estate, or any other beneficiaries they choose. Such a provision grants flexibility in adjusting the distribution strategy based on the family's changing circumstances. Keywords: General power of appointment, flexible distribution strategy, adjust distribution, beneficiaries. c) Limited Power of Appointment Trust: In this type of Marital Deduction Trust, the surviving spouse holds only a limited power of appointment. They have the authority to distribute the assets among a predetermined class of beneficiaries, often children or grandchildren. This type of trust is useful when the granter wants to ensure that the trust assets remain in the family line and are not redirected outside it. Keywords: Limited power of appointment, predetermined class of beneficiaries, family line, asset preservation. In summary, a Wyoming Marital Deduction Trust (Trust A) and Bypass Trust (Trust B) are essential components of estate planning in order to minimize estate taxes and ensure financial security for the surviving spouse. By utilizing various types of these trusts, individuals can adapt the structure according to their unique needs and safeguard their assets for the benefit of their chosen beneficiaries.
