A/B Trust

Trust Terms

A trust structure that splits into two shares at the first spouse's death to maximize estate tax savings for married couples.

An A/B trust is a provision within a revocable living trust. It divides the trust into two separate shares when the first spouse dies. Share A (the survivor's trust) holds the surviving spouse's property with full control. Share B (the bypass or credit shelter trust) holds the deceased spouse's property.

How an A/B Trust Works

Share A (Survivor's Trust): The surviving spouse keeps full ownership and control over their half.
Share B (Bypass Trust): The deceased spouse's assets go into a separate trust. The surviving spouse can receive income from Share B. They can also access principal for health, education, maintenance, and support. Share B stays out of the surviving spouse's taxable estate.

When an A/B Trust Makes Sense

The current federal estate tax exemption is near $14 million per person. Most families do not need an A/B trust for tax savings alone. However, A/B trusts still help families with larger estates. They also benefit couples worried about a potential exemption sunset. And they protect assets from a surviving spouse's future creditors or new spouse.

Your estate planning attorney can help decide if an A/B provision fits your situation.