What is a AB Trust?

An AB Trust is a type of Trust for married couples that utilizes Federal Estate Tax Law to shelter assets from federal and state estate taxation. The theory is two Trusts are created within each husband and wife's living trust. The first trust is tied to the federal estate taxation exemption that is authorized by the IRS (i.e. $3 million). The purpose of the first Trust is to use up to the maximum amount of amount that is sheltered against estate taxation. The goal is to use these assets and monies last because this Trust and pot of assets are exempt from estate taxation. The second type of trust is considered the "B Trust". The purpose of this Trust is assets greater than the federal estate taxation exemption amount go into this B Trust. This can be looked at like a supplemental trust meaning that any assets over the IRS allowed estate taxation exemption amount goes into this B Trust. The purpose of the B Trust is for the surviving husband or wife to spend these assets prior to the A Trust.

Sean Robertson is an estate planning, estate and gift taxation, and wills and trusts attorney. Sean Robertson can be reached at (312) 498-6080 or Sean@RobertsonLawGroup.com.