A-B Trust

AAA

DEFINITION of 'A-B Trust'

A trust created by a married couple with the objective of minimizing estate taxes. An A-B trust is is a trust that divides into two upon the death of the first spouse. It is formed with each spouse placing assets in the trust and naming as the final beneficiary any suitable person except the other spouse. The trust gets its name from the fact that it splits into two upon the first spouse's death – trust A or the survivor's trust, and trust B or the decedent's trust.

INVESTOPEDIA EXPLAINS 'A-B Trust'

The surviving spouse has complete control over the survivor's trust, which contains his or her property interests, but has limited control over the assets in the deceased spouse's trust. However, this limited control over the assets in the decedent's trust will still enable the surviving spouse to live in the couple's house and draw income from the trust, provided these terms are stipulated in the trust. Upon the death of the surviving spouse, the property in the decedent's trust passes to the beneficiary(s) named in this trust. As this property is not considered part of the second spouse's estate for purposes of estate tax, double-taxation is avoided.

RELATED TERMS
  1. Decedent

    A person who is no longer living. Just as a taxpayer's possessions ...
  2. Irrevocable Trust

    A trust that can't be modified or terminated without the permission ...
  3. Trust

    A fiduciary relationship in which one party, known as a trustor, ...
  4. Estate Planning

    The collection of preparation tasks that serve to manage an individual's ...
  5. Estate Tax

    A tax levied on an heir's inherited portion of an estate if the ...
  6. Deferred Tax Asset

    A deferred tax asset is an asset on a company's balance sheet ...
Related Articles
  1. Getting Started On Your Estate Plan
    Options & Futures

    Getting Started On Your Estate Plan

  2. Three Documents You Shouldn't Do Without ...
    Options & Futures

    Three Documents You Shouldn't Do Without ...

  3. An Estate Planning Must: Update Your ...
    Options & Futures

    An Estate Planning Must: Update Your ...

  4. Your Will: Why You Need A Power Of Attorney ...
    Options & Futures

    Your Will: Why You Need A Power Of Attorney ...

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center