Definition of A-B trust:
An A-B trust is a joint trust created by a married couple for the purpose of minimizing estate taxes. An A-B trust is a trust that divides into two upon the death of the first spouse. It is formed with each spouse placing assets in the trust and naming as the final beneficiary any suitable person except the other spouse.
The trust gets its name from the fact that it splits into two upon the first spouse's death – trust A or the survivor's trust, and trust B or the decedent's trust.
US trust that divides into two trusts upon the death of its settlor. One part (the A-trust) comprises of all the assets of the decedent which are in excess of the exclusions allowed at the time of his or her death, with the surviving spouse at its beneficiary. The other part (the B-trust) owns all the assets which are covered by the exclusions. This arrangement postpones the payment of estate taxes until the death of the surviving spouse. Also called marital residuary trust.
How to use A-B trust in a sentence?
- An A-B trust minimizes estate taxes by splitting the estate into a survivor portion and a bypass portion.
- The surviving spouse has limited control over the decedent's trust but the terms of the decedent's trust can be set to allow the surviving spouse to access property and even draw income.
- A-B trusts are not widely used as the estate tax exemption is sufficient for most estates.
Meaning of A-B trust & A-B trust Definition