Harness Money

What is an A-B Trust?

An A-B trust, also known as a marital bypass trust or a credit shelter trust, is a type of estate planning tool designed to minimize estate taxes. It is typically used by married couples to maximize the use of their individual estate tax exemptions. 

Under this arrangement, upon the death of one spouse, the couple’s assets are divided into two separate trusts: the “A” trust (also called the marital trust) and the “B” trust (also called the bypass trust or family trust). The A trust is funded with an amount equal to or up to the estate tax exemption, and it provides income to the surviving spouse for their lifetime. The B trust, funded with the remaining assets, bypasses the surviving spouse’s estate and passes directly to the beneficiaries, often children or other family members, without incurring estate taxes.

By utilizing an A-B trust, the married couple can effectively shelter a significant portion of their combined assets from estate taxes, thereby preserving more wealth for their beneficiaries. It’s important to note that estate tax laws can vary, and it’s advisable to consult with a qualified estate planning attorney or financial advisor for guidance specific to your situation.