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.
A Palm Beach Florida Marital Deduction Trust, also commonly known as a Marital Trust, is an estate planning tool that allows married couples to take advantage of the marital deduction rule to reduce their estate tax liability. This trust is specifically designed to ensure that the surviving spouse has sufficient income and support during their lifetime while also preserving the couple's estate for the benefit of their heirs or beneficiaries. Trust A, also referred to as the Marital Trust or "A" Trust, is created upon the death of the first spouse. The assets transferred to Trust A are exempt from federal estate taxes due to the unlimited marital deduction. The surviving spouse becomes the primary beneficiary of Trust A and can receive income generated from the trust assets. The surviving spouse is also given the authority to make distributions from Trust A if needed for their health, education, maintenance, or support. Bypass Trust B, also known as the Credit Shelter Trust, Family Trust, or "B" Trust, is created at the same time as Trust A. The purpose of Trust B is to maximize the couples' federal estate tax exemption by utilizing the deceased spouse's unused exemption, commonly referred to as portability or the Deceased Spousal Unused Exclusion Amount (DUE). Assets up to the estate tax exemption amount go into Trust B, bypassing the surviving spouse's estate and reducing potential estate taxes upon the death of the surviving spouse. By creating a Palm Beach Florida Marital Deduction Trust with Trust A and Bypass Trust B, married couples can ensure the preservation of their assets while minimizing estate tax obligations. This planning strategy is especially valuable for high net worth individuals who want to pass on their wealth to their family and loved ones. It should be noted that the types or names of Marital Deduction Trusts may vary depending on the specific estate planning goals, the state's laws, and individual circumstances. It is essential to consult an experienced estate planning attorney in Palm Beach, Florida, to understand the options available and tailor a plan that best suits your needs.
