If you have an A/B trust and you’re under the impression that when your significant other passes away you will automatically receive all of their assets, it may be time for you get in touch with an experienced elder law attorney, like ours at Aiello Law Group, to change or update your trust.
The way an A/B trust actually works is not what you might expect. A/B trusts were originally designed in an effort to protect a deceased spouse’s assets from hefty federal estate taxation. The way it works is that an A/B trust will prevent the surviving spouse from inheriting everything by dividing the total assets up into different, smaller trusts. The “Survivor’s Trust” will contain all of the surviving spouse’s personal/separate property as well as half of their joint or “community property.” Everything else is placed in a “B trust,” also known as a “Bypass Trust,” “Credit Shelter Trust,” or “Exemption Trust.” The surviving spouse will only ever actually “own” the A trust. Though they may receive some income earned by the other trust(s), the beneficiary cannot be changed which means the surviving spouse will never have full control of the assets. This, however, is great news for the beneficiary who inherits the B trust once the surviving spouse has passed, as they will be able to inherit the entire amount in full with zero tax liability. Of course, that was all back in 1997!
If you want your spouse to be able to maintain total control over all assets after your passing, you will want to get started amending your trust in full as soon as possible. The laws are different today than they were back then. As of 2018, as much as $11.2 million is now safe from federal estate taxation, and better yet, spouses can now claim their spouse’s exemption as well, increasing that amount to $22.4 million. There really is no need to try and protect those assets with an A/B trust. In fact, doing so may cause your spouse even greater frustration from having to answer to the trust’s named beneficiaries.
If you have any questions regarding your end-of-life planning, or you’re simply hoping to find reputable elder law attorneys who can help you figure out exactly what kind of estate planning best suits your unique circumstances, we hope you’ll take this moment a reach out to our remarkable staff at Aiello Law Group, today. We’re certain our team has all the answers you’re looking for! Call us, today, at 313.964.4900 or fill out the form in the sidebar or on our contact page, and learn more about how we can help you.
