An AB trust is a trust created by a married couple to avoid probate and minimize federal estate tax. An AB trust is created by each spouse placing property into a trust and naming someone other than his or her spouse as the final beneficiary of that trust. Upon the death of the first spouse, the surviving spouse does not own the assets in that spouse's trust outright, but has a limited power over the assets in accordance with the terms of the trust. Such powers may include the right to receive interest or income earned by the trust, to use the trust property during his or her lifetime, e.g. to live in a house, and/or to use the trust principal for his or her health, education, or support. Upon the death of the second spouse, the trust passes to the final beneficiary of the trust. For estate tax purposes, the trust is included in the first, but not the second, spouse's estate and therefore, avoids double taxation.
The Broward Florida Marital Deduction Trust, also known as Trust A, and the Bypass Trust, also known as Trust B, are two types of trusts commonly used in estate planning to maximize tax benefits and provide for the surviving spouse and heirs. The Broward Florida Marital Deduction Trust, or Trust A, is designed to utilize the marital deduction provided by the internal revenue code to minimize estate taxes upon the death of the first spouse. This trust allows the deceased spouse to transfer assets to the surviving spouse without incurring any estate taxes, thus reducing the overall tax burden. The surviving spouse has access to the income generated by the assets held in Trust A during their lifetime. However, they are not entitled to the principal of the trust, ensuring that the assets ultimately pass to beneficiaries chosen by the deceased spouse. The Bypass Trust, also known as Trust B or the Credit Shelter Trust, is created alongside Trust A and is designed to make use of the deceased spouse's federal estate tax exemption. This trust allows the deceased spouse to shelter a portion of their estate from estate taxes by placing assets, up to the exempted amount, into Trust B. The surviving spouse can benefit from the income generated by the assets held in Trust B but does not have direct access to the principal. Upon the death of the surviving spouse, the remaining assets in Trust B pass to the designated beneficiaries, typically children or other family members, free from estate taxes. The Broward Florida Marital Deduction Trust and Bypass Trust are powerful estate planning tools that enable individuals to minimize estate taxes while ensuring the well-being of their surviving spouse and heirs. Several variations and modifications of these trusts exist, including Qualified Terminable Interest Property (TIP) Trusts and Irrevocable Life Insurance Trusts (Slits), which provide additional flexibility and options for protecting assets and reducing tax liabilities. In summary, the Broward Florida Marital Deduction Trust — Trust A and Bypass Trust B are estate planning mechanisms used in Broward County, Florida, to minimize estate taxes by leveraging the marital deduction and the federal estate tax exemption. By utilizing Trust A and Trust B, individuals can provide for their surviving spouse, while also securing their assets for future generations.
