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Trust Types

AB Trust (Marital and Residual Trust) - Tapping new opportunities in the market

  • How many married clients do you have?
  • How many clients are married for a second time with children from a prior marriage?
  • How many clients would benefit from saving estate taxes assessed by the federal government at the time of death?

If your answer is "most" or "plenty," an opportunity to create a marital (A Trust) and residual or family trust (B Trust) through a revocable trust agreement or trust under will, may exist.

What - is an AB trust? Structurally, it is a revocable living trust which splits into two trusts, an A Trust and a B trust, at the first spouse's death. It's also an estate planning tool that allows your clients to "zero out" the estate tax on the first spouse to die, while creating an income stream for the surviving spouse or children. A Q-Tip (Qualified Terminable Interest Property) provision can also be used to shelter the marital trust for children from a prior marriage.

Why - is this so important? It's difficult to control future circumstances from the grave. Using a marital and residual trust with the appropriate provisions, such as a limited power of appointment over the residual trust given to the surviving spouse, can assure your clients' assets are distributed as they would wish and address changing family circumstances.

How - does an AB trust work? The spouse receives the income generated by the marital trust throughout his or her lifetime or remarriage as specified in the document. In addition, the marital trust may also allow for principal distributions. The residual trust can be structured to benefit the surviving spouse and children or just the children. When your client drafts their trust agreement or will, their attorney can use multiple estate planning techniques to address their individual concerns.

Benefits to your client

  • Provides clients with the opportunity to have you professionally manage the assets.
  • Can allow some control after death of how client's assets will be distributed.
  • Qualifies for the unlimited marital deduction (zero tax at the first spouse's passing).
  • Provides an income stream to the surviving spouse.
  • Assets may not be includable in probate estate of surviving spouse.
  • Assets in a revocable trust will not be included in the probate estate of the first spouse to die.
  • Can provide some protection for other intended remainder beneficiaries (generally children).

We can work with you, your clients and their attorneys to help ensure their estate planning wishes are executed with minimal estate tax consequences.

For more information contact Principal Trust at 1.800.332.4015, or visit our Personal Trust resource.

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