Now What? The problem with having an A/B trust

Nothing is worse than having your estate planning attorney advise you one way then change their mind the next. Well, we are doing it again. Before when the estate tax applied to many more people, it was important to create an A/B trust. Essentially this meant that a married couples’ trust divides into two separate trusts upon the death of the first spouse.

Fast forward to the present. The estate tax does not apply unless an estate exceeds 11 million dollars in 2018. However, and this is where the change is occurring, those trusts that divided into two separate trusts now cause a potential income tax problem for first to die’s share of the trust when the second spouse dies.

So the concern now is not estate taxes-it is income taxes.

What are your options? If both spouses are alive, get in to see your estate planning attorney at your earliest convenience and discuss this concern. If the first spouse has already passed and/or you have existing B trust (frequently called Decedent’s, Credit Shelter or Bypass Trust), still see your attorney since there are a few tools that may be implemented to avoid the potential tax issue upon the second spouse’s passing.