The Benefits of A-B Trust Planning for Blended Families

An A-B trust is a type of estate planning arrangement that is designed to provide benefits to married couples, especially in blended families or second marriages. This type of trust can help ensure that assets are distributed according to the wishes of the spouses and can help avoid certain tax consequences. Here are some of the benefits of an A-B trust:

1. Protection of assets for children from previous relationships: One of the primary benefits of an A-B trust is that it can help protect assets for the children of a previous marriage. When the first spouse dies, their assets are transferred to the B trust, which is designed to benefit their surviving spouse during their lifetime. After the surviving spouse passes away, the assets in the B trust
   are then passed on to the children of the first marriage or other named beneficiaries.
   
   
2. Control over distribution of assets: An A-B trust can also give the surviving spouse some
   control over the distribution of assets. For example, the surviving spouse may have the
   ability to use the assets in the B trust during their lifetime but may not be able to change
   the ultimate beneficiaries of the trust.
   
   
3. Minimization of estate taxes: An A-B trust can also help minimize estate taxes, but this is
   only necessary under current law for estates well over $10 million (for a married couple).
   When the first spouse dies, their assets are transferred to the B trust, which is not subject
   to estate taxes. This can help reduce the size of the taxable estate and minimize tax
   liability but has the burden of managing the B trust as an irrevocable trust.
   
   
4. Avoidance of probate: Since the distribution is in trust, the A-B trust can help avoid
   probate. Because the assets in the trust are not part of the probate estate, they can be
   transferred to the designated beneficiaries without going through the probate process.
   
   
5. Flexibility in estate planning: An A-B trust can also provide flexibility in estate planning.
   It can be designed to meet the unique needs of each family, and can be tailored to
   accommodate changing
   

In summary, an A-B trust can be an effective estate planning tool for blended families and second marriages. It can provide protection for the assets of the first spouse, give the surviving spouse some control over the distribution of assets, minimize tax liability, avoid probate, and provide flexibility in estate planning.

By Melissa L. Exline