For any married couples holding estate, it is always in their best interests to reduce estate taxes as much as possible. When the dreaded day arrives and one spouse passes away, a pressing question on their mind in regards to finances is how much will they lose from property taxation. Especially after the death of a partner, the other needs to know they are financially secure and safe as they begin a clean slate with their money. The traditional route for many has been through an AB Trust since the estate is split into two trusts, one of which cannot be taxed upon by the federal government.
However, estate laws have changed in recent years and the world has evolved at a rapid pace, causing both young and old couples to question whether an AB Trust is the best option for their property. They are keen to keep their financial freedom into their later years and make the best decision for their families.
Have AB Trusts Expired?
In 2021, people are wondering whether AB trusts are still relevant to the protection and distribution of estate funds and the answer is found depending upon your familial situation and whether the benefits outweigh the consequences.
The option is unfeasible if you and your spouse do not have the capital on the front end to begin and sustain an AB Trust. They are costly to operate and only those with the cash or credit in hand can keep them running for the life of the partners. In addition, the remaining spouse will not have full access to the B Trust, or “family trust” that provides estate funds to family members and other beneficiaries. Although they will be able to take money from the A Trust to support themselves, it may not be enough to sustain them in the long run amidst the pressures of future taxes and bills.
However, those who are married by law find benefit in obtaining an AB Trust, especially since their children will be guaranteed certain estate assets and funds. Otherwise, the federal government, outside of an AB Trust, would be able to tax the entire estate and prevent couples from saving a portion for their kids. Also, if the A Trust’s value is less than the federal estate tax exemption for the property, estate taxes would not be applied. This puts more money in the pockets of remaining spouses and places them in a more financially secure position.
Revoking an AB Trust
If you determine from looking at the benefits and consequences that an AB Trust is not right for you and your spouse, there is opportunity before one passes to remove it. This must be done by transferring trust property on a legal document and informing all involved parties of the trust’s termination. When these actions are taken and the AB Trust is destroyed, a couple’s entire estate plan is called into question. They must work together to restructure it so estate taxes are minimal and funds are allocated to interested parties in the desired manner.
Talk to Us About Your Estate Plan
Whether you are looking to revoke your AB Trust or reassess your estate plan, The Legacy Lawyers are here to help. We are honored to meet with you in a consultation to review your situation in detail so we can best serve you and your spouse. Our interests are with you: to reduce estate taxes and protect your family’s financial freedom. Schedule a consultation with our team of expert attorneys and lawyers by calling 800.840.1998 or filling out our online contact form.