An "A-B trust" is a type of trust established by a married couple that includes provisions requiring the allocation of assets on the death of one spouse to two separate trusts to be established only at that time.   One trust,  sometimes  referred  to  as  the "A Trust" or "Survivor's Trust", remains revocable and the assets are under the complete control of the surviving spouse.  The other trust, sometimes referred to as the "B Trust", "Decedent's Trust", or "Exemption Trust", gives the survivor no rights or limited powers to use the assets allocated thereto.  There are both estate tax and non-tax reasons for using an A-B trust.

              The principal tax benefit from using an A-B trust is to utilize the unified credit upon the death of the first spouse in order that an estate of up to $2,000,000 may entirely escape estate tax by having $1,000,000 of the assets pass tax free on the first death and another $1,000,000 of the assets pass tax free on the death of the second spouse.  An A-B trust is generally not necessary for a married couple whose total assets will not exceed $1,000,000 including life insurance and retirement plan benefits.

              The size of estate that passes tax free upon death will increase to $1,500,000 in 2004.  Further increases over the next few years will ultimately allow an estate of $3,500,000 to escape estate tax in 2009.  However, after the repeal of estate taxes for those who die in 2010, the maximum amount passing free of tax will decrease to $1,000,000 for those who die in 2011.

              Non-tax reasons for using an A-B trust include the desire of one spouse to assure that if he or she dies first, certain assets may be used to provide income or other benefits for a surviving spouse for his or her lifetime with the remaining balance of those assets passing to children or other specified beneficiaries upon the death of the second spouse.  This gives the first spouse to die some control over the ultimate disposition of assets after both spouses are deceased.

Survivor's Trust

Decedent's Trust