A-B Trust

From CEOpedia | Management online
A-B Trust
See also

A-B Trust is a way to avoid property taxes (if you have a fairly large building) for married couples. The AB Trust system allows that after the death of one of the spouses, the other could use the property of the deceased (S. D. Fisher 2008, s. 64). Division of AB trust into two separate trusts:

  • Trust A is referred to as marital trust (L. Rush Hunt, Lara Rae Hunt 2004, s.48). Trust A must belong to the federal subtraction of marriage property tax (L. Rush Hunt, Lara Rae Hunt 2004,s.49).
  • Trust B is most often presented as a credit shelter, family trust or bypass (L. Rush Hunt, Lara Rae Hunt 2004, s.48). Ineligible for federal marriage tax deduction (L. Rush Hunt, Lara Rae Hunt 2004,s.49).

In AB Trust, various block diagrams and charts should be used. This helps in tracking their assets (L. Rush Hunt, Lara Rae Hunt 2004, s.3).

The most important goal of AB Trust is to create savings for married couples from property tax. The most important thing at AB Trust is to maintain the assets of the deceased spouse. For some couples, establishing AB Trust is very useful (Clifford Denis 2017, s.42).

Having an AB trust is beneficial if you want to leave most of your assets to your spouse and if you have joint property with your spouse (Linda C. Ashar, Sandy Ann Baker 2010, s.163).

Example of A-B Trust

AB trust maximizes property tax exemption, allowing every person in the marriage to fully enjoy it. Example of AB trust operation. Let's assume that one marriage has a total of $ 2 million. If one person had left one million dollars to another, the surviving spouse would have had two million dollars. Of this amount, $ 500,000 would be taxable if the spouse died in 2008. To avoid such a high tax, trust AB was created. Each of them leaves $ 1 million in their confidence (A and B), lists their children as beneficiaries. If one of the spouses dies, the amount is paid to the other, but because the amount is less than the federal exemption, no tax is required (S. D. Fisher 2008, s. 65).


Author: Dominika Duda