What is an AB trust? A simple guide for married couples
Planning for the future can feel overwhelming—but it doesn’t have to be. An AB Trust is a tool married couples can use to protect assets, minimize estate taxes, and ensure their family is taken care of.
What Is an AB Trust?
An AB Trust, also called a “credit shelter trust” or “bypass trust,” is a type of living trust designed for married couples. It splits your estate into two parts when the first spouse passes away, helping to reduce estate taxes while keeping control over who inherits your assets.
How It Works
- Trust A (Survivor’s Trust): Holds assets for the surviving spouse, who can access income and principal as needed. Assets in this trust are still considered part of the survivor’s estate for future planning.
- Trust B (Bypass or Credit Shelter Trust): Holds assets up to the federal estate tax exemption. The surviving spouse can receive income from this trust, but the principal generally passes to other beneficiaries (often children) after the survivor passes. This helps reduce estate taxes.
Who Should Consider an AB Trust?
AB Trusts are most useful for couples with a sizable estate that may exceed federal or state estate tax limits. They’re also helpful for couples who want to:
- Provide for a surviving spouse while preserving assets for children or other beneficiaries
- Minimize estate taxes across both spouses
- Keep family assets protected and clearly distributed according to their wishes
Pros and Cons
- Pros: Potential estate tax savings, clear distribution of assets, provides for surviving spouse, protects heirs.
- Cons: More complex to set up and administer than a single trust, may require professional legal guidance, involves careful record-keeping.
How ElmTree Law Can Help
AB Trusts can be complicated, but they don’t have to be intimidating. At ElmTree Law, we guide couples through every step—helping you plan a future that protects your family and reduces stress. We make estate planning clear, friendly, and tailored to your goals.