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.
A Philadelphia Pennsylvania Marital Deduction Trust is a legal trust established in the state of Pennsylvania that allows a person to maximize their estate tax exemptions and provide for their surviving spouse. It is often created as part of an estate plan to take advantage of the marital deduction tax benefits offered by the Internal Revenue Code. Trust A, also known as the Marital Trust or the A Trust, is a component of the Philadelphia Pennsylvania Marital Deduction Trust. It is designed to hold assets for the benefit of the surviving spouse after the initial spouse passes away. The assets placed in Trust A are eligible for the marital deduction, meaning they are not subject to federal estate taxes upon the death of the first spouse. The surviving spouse can receive income generated by the trust and, in some cases, have access to the principal to maintain their standard of living. Trust B, also known as the Bypass Trust, Credit Shelter Trust, or Family Trust, is the second component of the Philadelphia Pennsylvania Marital Deduction Trust. It is designed to utilize the available federal estate tax exemption of the first spouse to die. Assets equal to or less than the federal estate tax exemption amount are transferred to Trust B upon the death of the first spouse. These assets are not subject to estate taxes in the surviving spouse's estate and can pass to beneficiaries, such as children or other family members, without incurring additional taxes. Overall, the Philadelphia Pennsylvania Marital Deduction Trust, consisting of Trust A (Marital Trust) and Trust B (Bypass Trust), provides a comprehensive estate planning strategy for married couples in Pennsylvania. It enables the preservation and efficient distribution of assets, minimizes potential estate tax liabilities, and ensures financial security for the surviving spouse while still benefiting future generations.
