Living Trust

A-B Married Trust

The A-B married trust is a way to protect assets within a marriage. Read more about it here.

An A-B married trust is a trust for married couples—also commonly called a bypass trust—which recognizes each spouse’s right to a unified credit. The provisions are created when both spouses are alive but go into operational effect when the first spouse dies.

Many living trusts can have a "Springing A-B" Provision—permitting the revocation of trust "B" if the estate is too small to warrant using trust B. Traditionally, the purpose of "Trust B" is to maintain both federal estate tax exemptions if the estate is valued over $675,000. However, if the estate is under $675,000, the "B" section of the trust is not always necessary.

Technically, the new language makes every married trust an "A-B" trust and then permits the surviving Trustee to elect whether or not to activate the "B" trust based on circumstances at the time of the fist spouse's death.

We must make sure that within the A-B married trust, the "B" trust qualifies for and receives the unified credit. This requires that the survivor not have too much control over the "B" trust. If a survivor has unhindered access to or a general power of appointment over "B" then the assets in "B" are included in the survivor's estate and the purpose of the "A-B" trust is defeated.

As a result, there are very specific requirements on the survivor if they intend not to use "B". The survivor must:

(1) get the written, notarized consent of each beneficiary of the "B" trust;

(2) show that the administration of "B" is not warranted or is impractical.

Advantages to having an A-B married trust:

• You will not have to amend your trust as your estate increases or decreases in value.

• You will not have to amend your trust if the dollar amount of the unified credit is changed by congress.

• The A-B married trust offers the greatest amount of flexibility to the surviving spouse to determine how assets are managed.

• Protects children from a previous marriage from being erased as a beneficiary if their parent is the first to die.

Disadvantage to having an A-B springing trust:

• If they do not need to split the trust into two (2) sections, then the surviving spouse must get a sign-off of beneficiaries to revoke or not use the "B" trust. (The sign-off should be of little concern if the beneficiaries are "friendly" and if the beneficiaries are "hostile" then the sign off protects the surviving spouse from potential lawsuits for mismanaging trust assets.)

There are many reasons to have an A-B married trust. If your estate is large enough to benefit from this type of trust, consult with your attorney or estate planning provider to set one up.