When it comes to creating an estate plan to protect your assets and provide for the ones you love, there are numerous options to consider, including an AB trust, which some choose to help reduce a surviving spouse’s tax liability when the first spouse passes away. These trusts use a unique set of rules to provide some distinct advantages and protect families from unfair taxation.
In very general terms, AB trusts allow one spouse to retain use of a certain piece of property while taking out of their personal ownership for tax reasons. When one spouse in a couple with children or other beneficiaries passes away, the surviving spouse does not automatically receive the property of the deceased. Instead, that property passes into the AB trust, where it waits for the other spouse to pass away before distribution to heirs or beneficiaries.
However, although the surviving spouse does not legally own the assets placed in the trust, he or she still retains some rights to use these assets, such as a family home. In fact, the assets placed within the trust are only put there on the condition that the surviving spouse may openly use the assets as long as he or she abides by other terms set forth in the trust. Once the surviving spouse passes away, then the trust will likely distribute the assets to the surviving beneficiaries.
If you believe that an AB trust may suit your needs, an experienced attorney can help you examine your circumstances and create an estate planning strategy that protects your rights and priorities while providing for the ones you love.
Source: FindLaw, “AB Trusts: The Tax-Saver,” accessed Jan. 19, 2018