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.
Alameda California Marital Deduction Trust — Trust A and Bypass Trust B are two types of trusts commonly used in estate planning in the state of California. These trusts aim to protect and distribute assets in a tax-efficient manner, providing financial security to married couples. Trust A, also known as the Marital Deduction Trust, is designed to maximize the use of the marital deduction allowed under federal estate tax laws. It allows a surviving spouse to claim a deduction for the full value of assets transferred to the trust upon the death of the first spouse. This means that the assets in the Marital Deduction Trust may not be subjected to estate taxes upon the death of the first spouse, which allows for the preservation and more efficient transfer of wealth to the surviving spouse. Bypass Trust B, also known as a Credit Shelter Trust or a B Trust, is utilized in conjunction with Trust A to further minimize estate taxes. Upon the death of the first spouse, this trust requires a portion of the deceased spouse's assets to be transferred into the bypass trust, up to the maximum federal estate tax exemption amount. The primary purpose of this trust is to utilize the deceased spouse's estate tax exemption, effectively sheltering a significant portion of the couple's combined wealth from estate taxes. The surviving spouse may still possess access to the income generated from the bypass trust for their lifetime but does not have complete control over its assets. Upon the death of the surviving spouse, the remaining assets in the bypass trust typically pass to the designated beneficiaries, usually children or other heirs named in the trust. In Alameda, California, these trusts are commonly used to ensure the efficient transfer of assets and minimize tax implications for married couples. They provide a way to protect and preserve wealth for future generations while still ensuring the financial stability and security of the surviving spouse. If there are variations of these trusts specific to Alameda, California, they may include tailored provisions to comply with any specific state laws or regulations. It's important to consult with an experienced estate planning attorney in Alameda, California, to ensure the trusts are structured correctly and align with individual circumstances and goals.
