B TRUST
Back to GlossaryDefinition
A trust created to ensure that an individual makes use of his applicable estate tax credit. Also known as a B Trust or Credit Shelter Trust
Summary
A B Trust is a type of irrevocable trust that receives assets from an A-B trust arrangement upon the death of the first spouse. Also known as a bypass trust or credit shelter trust, it's designed to shelter assets from federal estate taxes by utilizing the deceased spouse's estate tax exemption. The surviving spouse can receive income from the trust and may have limited access to principal, but the assets are not included in their taxable estate, allowing the full exemption amounts of both spouses to be preserved for their heirs.
Usage Context
Essential when studying estate planning strategies for married couples, understanding tax-efficient wealth transfer, and analyzing trust structures in estate administration.
Common Confusions
- Thinking the B Trust is revocable like the A Trust
- Confusing B Trust with a simple bypass trust structure
- Believing the surviving spouse owns the B Trust assets outright
- Assuming B Trusts are only for wealthy families
- Misunderstanding the tax benefits and thinking they avoid all taxes
