Should You and Your Spouse Use an AB Trust?


Depending on the size of your estate, your family and the executor might have to deal with federal estate taxes. To avoid estate taxes, you can choose to establish an AB trust. Whether or not the trust is the right move for you depends on various factors. If you are considering an AB trust to avoid estate taxes, here is what you need to know. 

What Is an AB Trust?

An AB living trust, or A-B trust, works by transferring the assets in the trust to the surviving grantor when the first grantor passes away. For instance, if you and your spouse are the grantors listed, he or she will have access to the contents of the trust. 

Since the assets are held in the trust, they are not considered to be part of the estate, which means they would be exempt from certain federal estate taxes. 

Is an AB Trust Right for You?

In the past, an AB trust made sense for couples with large estates. However, changes to the federal estate-tax laws render the use of a trust unnecessary in many cases. New estate-tax laws allow for the transfer of larger amounts to a surviving spouse without facing certain estate taxes. 

As of October 2016, the filing of an estate tax return is only required on estates that have gross assets of $5,450,000 or greater. Unless your estate exceeds that amount, an AB trust might not be necessary. 

It is important to note that although your estate might not face federal estate taxes, it is possible that state taxes might be required. Laws concerning estate taxes vary by state. Check your state's laws to determine if using an AB trust is still necessary to avoid taxes. 

Are There Disadvantages to Using an AB Trust?

If you are still considering an AB trust, it is important that you also consider the disadvantages. One of the biggest is that restrictions can be placed on how the surviving spouse uses the assets in the trust. 

Depending on the language used in the trust, the surviving spouse might not receive the actual asset and may instead receive the income or earnings that are generated from the asset. For the surviving spouse, this could mean not being able to sell assets such as property. 

The AB trust could also mean significant paperwork for the surviving spouse or executor of the estate. He or she will have to retain records for the trust as long as it is in existence. 

If you are concerned with estate taxes or other aspects of your estate planning, work with an attorney such as Patricia K Wood Atty to determine the best way to handle your estate. 


7 October 2016

The Important Role of the General Attorney

Like many other people, I admire the important tasks lawyers take on every day. I’m amazed at how knowledgeable general attorneys are about a variety of subjects. These professionals can accomplish many complicated jobs seamlessly, such as representing a client in a civil lawsuit, assisting a business with a merger, and acting on a client’s behalf in a medical malpractice lawsuit. Besides creating detailed legal briefs, they must argue their clients’ cases in court in front of a judge, jurors, and others. On this blog, I hope you will discover how crucial general attorneys are to this country’s legal system.