A/B Trust

A/B Trust

A/B Truts Needed: We presently have basic Wills with our spouses as primary beneficiary and 2 children as secondary beneficiaries. We need to include an A/B Trust provision as the estate tax exclusion is nearing $3 million. Does this require a complete rewrite or replacement of our Wills? What would be a fair price to have this done?


Let's first define "A" and "B" trusts. This terminlogy is confusing and unfortunate because it only makes a complex topic more complex. A bit of background. Each person can bequeth at death up to $2 million (not $3 Million, but the $2 million is scheduled to increase to $3.5 million in 2009) without estate tax. However, if a husband (wife) bequeths his (her) entire estate to te surviving spouse then the first to die spouse's $2 million exclusion will be lost. How so? Because the husband has effectively doubled up his assets in the surviving wife's estate where everything over $2 million will be taxed. If instead he gave $2 million to a trust that could benefit his surviving spouse (and other heirs if he wished) his surviving spouse could benefit from those assets (e.g. receive distributions) without those assets being included in her estate. This is often called a "by pass" or "B" trust since it by passes the surviving spouse's estate. The remainder of the estate (i.e., under current law in 2007) over $2 million could go to a marital trust so no estate tax will be due on the first death because of the unlimited estate tax exclusion. This trust is often a Qualified Terminable Interest Property Trust (QTIP) or marital trust. These two trusts are called "A/B" trusts by some. Depedning on how your wills were written there may be no need to change anything. Wills are often written to transfer assets based on the federal estate tax exclusion in effect on death, so that the changing amounts may not require new documents. This, however, ignores state estate tax and other planning issues. If your estate has none of this then it coudl be advisable to have new wills done.

The price for all this will depend on what you're getting and will vary by location (large cities, etc. may be more costly then rural areas, etc.). Hey, its like buying a car. How much? Depends on the type of car.

Also, be careful. You, as everyone, needs me than a will. What you really want and should have is a comprehensive plan, powers of attorney, living wills, health proxies, wills with various trusts, and perhaps more. Consult an estate planner in your state to determine what you really need before asking for prices.

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