Now That the Estate Tax Limit Is $5,000,000+, Do I Still Need an A-B Living Trust?

Attorneys are always asked, “When we could only give $600,000.00 estate tax free to our kids, do I still need an A-B living trust now that the tax-free limit is $5,000,000.00?”

Maybe.

If a married couple has more than $5,000,000.00 in assets, an A-B trust is absolutely necessary to increase the tax-free amount that can be given to their children and beneficiaries.  Properly structured, an A-B trust can be used to transfer $10,000,000.00 or more, estate tax free.

If a surviving spouse is not a United States citizen, he or she could be taxed on an inheritance from their spouse.  A special type of marital trust called a Qualifed Domestic Trust (“QDOT Trust”) may be needed to avoid estate tax when the first spouse dies

An A-B living trust is often indicated for blended families.  The “A” trust contains the survivor’s portion of the estate and can be directed to the survivor’s children and beneficiaries.  The “B” trust contains the deceased spouse’s portion of the estate and can be directed to the decedent’s children and beneficiaries.  Organizing the estate correctly can reduce conflict between the blended families.

Finally, an A-B living trust can be used to protect a family against the wiles of a new spouse.  After the first spouse dies, his or her portion of the couple’s estate can be safely placed in the “B” trust; providing income and resources for the surviving spouse, but protected from being given to a new spouse or family.

Are there cases in which an A-B trust is not necessary?

Absolutely.

If your family is free from conflict.  If your family net worth is less than $5,000,000.00.  If you and your spouse agree that you are not worried about a subsequent spouse after one of you dies.  We can re-structure your trust to eliminate the A-B requirement.

 

Acuña ❖ Regli provides expert services within the four corners of family wealth transfers: Estate Planning, Probate and Trust Administration; Conservatorship and Special Needs Planning; and, Inheritance Litigation.  However, we are available to counsel our clients and to refer them to competent, qualified attorneys who can help if they need further, specialized help.  ContactUs@AcunaRegli.com or call (925) 906-1880.