Breaking down AB trust basics for your estate

On Behalf of | Jan 20, 2023 | Trusts, Wills |

When it comes to preserving your legacy, you probably have your own intentions for your wealth. Wills and trusts are good ways to hand down to the next generation what you have earned over your life. However, some trusts act as tools to help you arrange your assets for your spouse in the event of your death.

People commonly owe taxes on assets over the estate tax limit of $11.7 million. An AB trust maximizes the tax exemption for your and your spouse’s estate.

A single trust for married couples

AB trusts start out as a family trust that is revocable. You and your spouse may still access the funds while you are both alive. This means that it still counts as income for the purposes of qualifying for Medicaid and other programs with income-based eligibility.

Two trusts after a spousal death

When you or your spouse dies, this family trust divides. Trust A goes to the surviving spouse while Trust B receives assets up to the federal estate tax exemption limit. Trust B is now irrevocable, meaning you cannot access it easily. The assets are out of your control, but depending on the wording of your agreement, you or your spouse may receive income from the trust.

Passing assets on to beneficiaries

After the surviving spouse dies, both Trust A and Trust B pay out to beneficiaries such as your children or others you wish to receive your estate.

Your situation may benefit from an AB trust, but make sure to explore all tools available to you to protect your family’s finances and secure your future.

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