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 Orlando Florida Marital Deduction Trust (Trust A) is a specific type of trust designed to provide estate tax benefits to married couples in Orlando, Florida. It is an essential estate planning tool utilized to shield assets from estate taxes when the first spouse passes away. This trust is created to maximize the use of the marital deduction provided by the Internal Revenue Code. Trust A, also known as the "marital trust" or "A trust," is typically set up upon the death of the first spouse. It allows the deceased spouse's assets to be transferred into a trust that provides lifelong benefits for the surviving spouse while potentially minimizing estate taxes. The surviving spouse is usually the primary beneficiary and has access to the income generated by the trust and, in some cases, the principal. In Orlando, Florida, there are various types of Marital Deduction Trusts categorized under Trust A, each tailored to meet different needs and objectives. These variations include: 1. Qualified Terminable Interest Property Trust (TIP Trust): This type of Trust A is commonly used when there are stepchildren involved, or in cases where the surviving spouse needs to be provided for but ultimate control and distribution of assets are desired to pass to a further generation or beneficiaries. 2. General Power of Appointment Trust (GPA Trust): In this variation of Trust A, the surviving spouse retains significant control and flexibility over the trust assets. They are granted a general power of appointment, allowing them the ability to direct who receives the trust principal upon their death, providing additional control over the ultimate distribution of assets. On the other hand, the Bypass Trust (Trust B), also known as the "credit shelter trust" or "exemption trust," is another integral component of estate planning. It works in tandem with Trust A to maximize tax benefits by ensuring both spouses' individual estate tax exemptions are fully utilized. Trust B is typically funded upon the death of the first spouse and holds assets up to the available exemption limit. The surviving spouse may receive income generated by the trust but usually does not have access to the principal, which is preserved for the beneficiaries, often children, grandchildren, or other designated individuals. In summary, the Orlando Florida Marital Deduction Trust — Trust A and Bypass Trust — - are vital estate planning instruments utilized by married couples in Orlando, Florida, to minimize estate taxes, provide for the surviving spouse, and ensure the efficient transfer of assets to the chosen beneficiaries upon both spouses' passing. The variations under Trust A, such as the TIP Trust and GPA Trust, serve different purposes to accommodate specific needs and objectives, while Trust B works alongside Trust A to maximize tax benefits by fully utilizing individual estate tax exemptions.
