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What is an AB trust?

There are many kinds of trusts, each with their own advantages and best uses. When creating an estate plan, trusts often arise as a tool for transferring assets without incurring unnecessary taxation. While many trusts offer some form of tax shelter, an AB trust features unique methods for keeping property in the family without creating an undue estate tax.

Without any proper preparation, when one spouse passes away and leaves his or her estate to the other spouse, the estate may sustain significant taxation. Under an AB trust, each spouse places his or her property into an irrevocable trust, thereby giving up technical ownership of the assets. However, the AB trust is set specifically to benefit a surviving spouse.

Under an AB trust, it is possible for the surviving spouse to still use property in the trust, such a home. Likewise, the trust may even pay out benefits to the surviving spouse for the remainder of his or her life, but still diminish the size of the surviving spouse’s estate. When the surviving spouse does eventually pass away, his or her assets, as well as the assets within the AB trust, will be distributed to the original beneficiaries.

Of course, such broad benefits are only available by giving up significant amounts of control over assets by placing them in an irrevocable trust. If you believe that you may benefit from an AB trust, do not hesitate to seek out guidance from a legal professional who can help you understand all of the implications of this legal tool and create the perfect documents for your needs.

Source: Findlaw, “AB Trusts: The Tax-Saver,” accessed March 31, 2017


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