Using an AB trust to reduce estate tax

Married couples in North Carolina might want to know about the possible tax benefits they could be eligible for, and an AB trust is one tool that a couple may wish to utilize. Whether one has a large or small estate, anyone who has property subject to an estate tax may need an AB trust.

When a person passes away, this benefactor can pass assets to others through a will. When transferring property this way, the estate is taxed and goes through probate. AB trusts allow spouses to leave their estate to the trust instead of a partner. When both people pass away, the assets in the trust go to the couple's beneficiaries. An AB trust can stipulate that an estate should be used for the benefit of the surviving spouse, which lets this spouse use the property.

The property in an AB trust is not subject to estate tax because the surviving spouse does not own the property. The property belongs to the trust and then to the beneficiaries. This reduces taxable expenses by half. When one spouse dies, an AB trust is divided into two trusts. Trust A is irrevocable as it contains the decedent's share of the trust while the surviving spouse still has access to his or her share in trust B. When both people die, beneficiaries receive trust A tax-free. Depending on the amount, trust B could also be tax-free due to exemptions.

There are multiple types of trusts, and an AB trust is only one type of fund that could be used when leaving an estate behind. One may wish to speak to an estate planning attorney. When deciding whether a trust is necessary, one might look at the kind of assets he or she possesses as some may not be subject to the probate process.

No Comments

Leave a comment
Comment Information
Email Us For a Response
Orsbon & Fenninger, LLP - Estate Planning

Talk With Us: Schedule A Consultation

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Office Location

Orsbon & Fenninger, LLP
4201 Congress St.
Suite 110
Charlotte, NC 28209

Toll Free: 888-314-8134
Phone: 704-900-3883
Fax: 704-556-9601
Map & Directions

Office Hours: Monday : 8:30am–5pm Tuesday : 8:30am–5pm Wednesday : 8:30am–5pm Thursday : 8:30am–5pm Friday : 8:30am–5pm