If the sole reason for creating an A/B trust was to minimize federal estate taxes, then you may assume you don’t need one if your estate is less than the $5 million exemption (indexed for inflation). However, there are a number of other reasons to do an A/B trust.
An A/B trust is beneficial to minimize or avoid state estate taxes. In addition to federal estate taxes, there are state estate taxes which generally have far lower exemptions.
Creditor protection is another reason to have an A/B trust. With an A/B trust, the trust can protect up to half of the estate value from future creditors of the surviving spouse. Considering that approximately 1 in 12 Americans are involved in some type of litigation, this is an important protection to have.
The A/B trust protects the decedent’s heirs if the surviving spouse gets remarried. The B trust can ensure that the estate of the decedent is passed on to his/her heirs instead of the new spouse. It can also protect up to half of the estate in the event the surviving spouse gets divorced. With over 50% of marriages ending in divorce, it is vital to protect the assets.
Contributed by MH Prescott, Flagstaff and Arrowhead Estate Planning Attorney David T. Eastman
What the Attorneys of Morris Hall Can Do For You:
The attorneys at Morris Hall have 100’s of years of combined experience ensuring that families’ assets are protected from probate, unnecessary taxes, creditors, ex-spouses and Medicaid spend-down. The attorneys also help those in Arizona and New Mexico to apply for and receive Medicaid assistance and Veterans Benefits. Our Arizona offices are located in Phoenix, Mesa, Scottsdale, Cave Creek, Tucson, Prescott, Flagstaff and Arrowhead. Our New Mexico offices are located in Albuquerque, Las Cruces and Santa Fe. Contact us today at 888.222.1328 to schedule an appointment!
This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.
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