What are disclaimer trusts and A-B trusts?

These are trust options for couples who are married. Both are revocable until the death of the first spouse, and both can form two sub-trusts upon the death of the first spouse. A Disclaimer Trust permits a voluntary division into two sub-trusts if the surviving spouse thinks it is in the best interest of the beneficiary. However, an A-B trust generally contains compulsory language for the division.

The “A” trust, which is frequently called the “Marital Trust,” is intended to benefit the surviving spouse. The “B” trust holds assets with a value that is equivalent to that of the deceased spouse’s estate tax exclusion amount. The B-trust, which is also called the “By-Pass Trust,” is held for the surviving spouse’s benefit.

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