Who is the trustee of an AB trust?

Since the husband and wife are usually the initial trustees, the survivor is normally the sole trustee after the first one dies. All of the existing assets must be re-registered in the surviving spouse’s name as the new sole trustee.

Can AB trust be changed by surviving spouse?

The AB trust is irrevocable. Once one spouse dies, there cannot be any changes made to the trust. This can create some issues and has even caused friction between the surviving spouse and the named beneficiaries of the trust. These changes may even encourage you to change or even revoke your trust.

Are AB trusts still needed?

Are AB Trusts Obsolete? AB Trusts are not entirely obsolete, though they are much less useful than they once were because of changes in estate law over time.

Does AB trust get a step up in basis?

The appreciated assets in the B trust pass free of estate tax to the heirs at the second death, as was the goal of this trust. But the heirs receive no basis step-up, resulting in federal capital gains taxes of up to $119,000 ($500,000 × 23.8%), depending on the heirs’ income tax brackets.

What is the purpose of an AB trust?

An A-B trust is a joint trust created by a married couple for the purpose of minimizing estate taxes. Upon the death of the first spouse, an A-B trust divides into two. It is formed with each spouse placing assets in the trust and naming as the final beneficiary any suitable person except the other spouse.

What happens to bypass trust when surviving spouse dies?

When the surviving spouse dies, all assets in the bypass trust go directly to the heirs. These assets “bypass” the second estate, so they are not included in the surviving spouse’s gross estate. Alternatively, assets could remain in the trust for the benefit of the heirs, if desired.

What happens to Bypass Trust when surviving spouse dies?

What is the advantage of an AB trust?

An A-B trust minimizes estate taxes by splitting the estate into a survivor portion and a bypass portion. The surviving spouse has limited control over the decedent’s trust but the terms of the decedent’s trust can be set to allow the surviving spouse to access the property and even draw income.

What should you not put in a living trust?

Assets that should not be used to fund your living trust include:

  1. Qualified retirement accounts – 401ks, IRAs, 403(b)s, qualified annuities.
  2. Health saving accounts (HSAs)
  3. Medical saving accounts (MSAs)
  4. Uniform Transfers to Minors (UTMAs)
  5. Uniform Gifts to Minors (UGMAs)
  6. Life insurance.
  7. Motor vehicles.

Do I get a step-up in basis when my spouse dies?

Step-up in basis has a special application for residents of community property states such as California. There is what we call the double step-up in basis that may apply to your situation. When one spouse dies, the surviving spouse receives a step-up in cost basis on the asset.

How are AB trusts funded?

An AB trust is a joint trust commonly created by a married couple to minimize estate taxes prior to the considerable increase in federal estate tax exemption. This trust is funded with assets of each spouse and divides into two separate trusts (Trust A and Trust B) upon the death of the first spouse.

What happens to a bypass trust when the surviving spouse dies?