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Is the AB trust right for me? Part 1

On Behalf of | Mar 30, 2018 | trusts

There are a variety of tools at one’s disposal when it comes to formulating a solid estate plan. In order to ensure that an estate plan is tailored to an individual’s unique needs and wishes, they must become familiar with all options available to them and decide accordingly. This may sound easy enough, but the truth of the matter is that the number of options can become overwhelming. This can be especially true with trusts.

One trust option is the AB trust. Often referred to as the tax-saver trust, this legal vehicle allows an estate to avoid estate taxation by utilizing estate assets for the benefit of one’s surviving spouse. This means the trust property can be used by the spouse, but he or she does not own it. Therefore, since the property remains in trust and has not technically been transferred, the estate tax does not apply.

This can be an especially tempting option to couples who have a significant amount of assets. The trust allows a surviving spouse to use the trust property, collect interest on those assets, and utilize the assets to benefit his or her health, standard of living and/or education. Once the surviving spouse passes away, then the trust property is distributed to the trust’s beneficiaries.

There are disadvantages to this type of trust, though. For example, it is irrevocable, meaning that once it is created it cannot be changed. This can create conflict amongst beneficiaries and a surviving spouse, especially since a spouse who once enjoyed co-ownership of certain assets now only has access to it via the trust.

However, just like all estate planning tools, the AB trust is something for Arizona families to consider. To learn more about the AB trust and other trust options, individuals can speak with an attorney of their choosing, preferably one who is skilled at taking a holistic approach.