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 Fort Lauderdale Florida Marital Deduction Trust, also known as Trust A, and Bypass Trust B, are both common estate planning tools used in Fort Lauderdale, Florida. These trusts aim to maximize the available estate tax exemption for married couples while providing financial protection and benefits to surviving spouses. Trust A, or the Marital Deduction Trust, is designed to take full advantage of the unlimited marital deduction provided by the Internal Revenue Code. This deduction allows the transfer of unlimited assets from one spouse to another, free from estate and gift taxes. In the case of Trust A, the assets are transferred to the surviving spouse upon the death of the first spouse. The surviving spouse becomes the sole beneficiary and has the right to income generated by the trust assets, and, in some cases, the principal as well. However, it's important to note that the assets in Trust A will still be subject to estate tax upon the death of the surviving spouse. Bypass Trust B, also known as the Credit Shelter Trust or Family Trust, complements Trust A by utilizing the available estate tax exemption at the first spouse's death. The purpose of this trust is to shelter a certain amount of assets from estate taxes, enabling them to pass to beneficiaries other than the surviving spouse without incurring estate tax liabilities. The assets transferred to Trust B can grow and provide financial benefits to the named beneficiaries while limiting the tax burden on the estate. The surviving spouse may also receive income from Trust B, but their access to the principal may be more limited compared to Trust A. There are variations and additional types of marital deduction and bypass trusts that may exist depending on the specifics of an individual's estate plan. Some examples include Qualified Terminable Interest Property (TIP) Trusts, Elective Marital Share Trusts, or disclaimer trusts. These trusts offer different features and benefits, allowing individuals to customize their estate plans based on their unique circumstances and objectives. In conclusion, the Fort Lauderdale Florida Marital Deduction Trust — Trust A and Bypass Trust B are essential estate planning tools utilized in Fort Lauderdale, Florida, to maximize estate tax exemptions for married couples. Trust A focuses on providing financial protection to surviving spouses by transferring assets free from estate and gift taxes, whereas Trust B aims to shelter assets from estate taxes, allowing them to pass to non-spousal beneficiaries. There may be variations of these trusts, such as TIP trusts or disclaimer trusts, to suit the specific needs of individuals and their estate plans.
