A-B TRUST
Back to GlossaryDefinition
A trust that divides into two upon the death of the first spouse. Formed with each spouse placing assets in the trust and naming the beneficiary any person except the other spouse. It splits into two upon the first spouse's death – trust A or the survivor's trust, and trust B or the decedent's trust.
Summary
An A-B Trust is an estate planning tool designed for married couples to minimize estate taxes and provide financial security for the surviving spouse. When created, both spouses contribute assets to a single trust, but they cannot name each other as beneficiaries. Upon the first spouse's death, the trust automatically splits into two separate trusts: Trust A (the Survivor's Trust) which the surviving spouse controls and can modify, and Trust B (the Decedent's Trust) which becomes irrevocable and holds the deceased spouse's assets. This structure helps couples take advantage of both spouses' estate tax exemptions while ensuring the surviving spouse has access to income and potentially principal from both trusts.
Usage Context
Understanding A-B Trusts is crucial when studying estate planning strategies, marital property law, tax-efficient wealth transfer, and trust administration. This concept is particularly important when analyzing how couples can maximize their estate tax exemptions and provide for both surviving spouses and ultimate beneficiaries.
Common Confusions
- Thinking spouses can name each other as beneficiaries in the original trust
- Confusing which trust the surviving spouse can modify (only Trust A)
- Believing both trusts become irrevocable after the first death
- Misunderstanding that Trust B assets still provide income to the surviving spouse
- Assuming A-B Trusts are only for wealthy individuals
