What is meant by an A B Trust?

An A B trust is a trust for married couples designed to reduce estate taxes. In this calendar year, the first $3,500,000 of every person’s estate (including lifetime gifts exceeding the annual $13,000 exclusion) is exempt from federal estate taxes. This is known as the Unified Credit Exemption Against Gift and Estate Taxes. An A-B trust allows the couple to take advantage of both of their exemptions — resulting in a “doubling effect” from $3,500,000 to $7,000,000 — upon the second spouse’s death. As a result, an A-B Trust can save hundreds of thousands of dollars in estate taxes, money that will be passed on to your family or other beneficiaries. Sometimes, a modified A-B Trust, known as a Disclaimer Trust, is appropriate. Without this special type of estate planning, one of the exemptions will usually be lost.