Glossary term
A-B Trust
An A-B trust is an estate-planning structure that can divide assets into separate trust shares after the first spouse dies.
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What Is an A-B Trust?
An A-B trust is an estate-planning structure that can divide assets into separate trust shares after the first spouse dies. Historically, married couples often used A-B trusts to help use both spouses' estate-tax exemptions and control how assets pass after the second spouse dies.
The term usually refers to two trust shares: one share for the surviving spouse and another share that may hold the deceased spouse's assets for tax, control, or inheritance-planning purposes. The exact structure depends on the documents and state law.
Key Takeaways
- An A-B trust can split assets into separate trust shares after the first spouse dies.
- It has often been used for estate-tax planning and inheritance control.
- Modern portability rules changed how many couples use A-B trust planning.
- An A-B trust can still matter for blended families, asset control, and state estate-tax planning.
- Older A-B trust documents should be reviewed periodically.
How an A-B Trust Works
After the first spouse dies, the trust may divide assets into separate shares. One share may continue for the surviving spouse's benefit. Another share may be structured to preserve the deceased spouse's planning goals, such as controlling final beneficiaries or using available exemption amounts.
The surviving spouse may have access to income or principal depending on the trust terms, but the assets may not be treated the same as if they were inherited outright.
Why A-B Trusts Became Common
A-B trusts became common because estate-tax rules historically made it important for each spouse to use an exemption. Without planning, assets could pass outright to the surviving spouse and potentially waste the first spouse's exemption. The A-B structure helped address that issue.
Trust share | Common planning role |
|---|---|
A trust | Often associated with the surviving spouse's share |
B trust | Often associated with the deceased spouse's share or bypass planning |
Terminology can vary, so the trust document matters more than the label.
Why Older A-B Trusts Need Review
Federal estate-tax portability and higher exemption amounts changed the planning landscape for many households. Some older A-B trusts still work well. Others may create unnecessary complexity, accounting, tax, or access issues if they were drafted for a tax environment that no longer applies to the family.
A review can help determine whether the trust still fits the family's goals, especially if family structure, assets, state law, or tax rules have changed.
A-B Trust Versus QTIP Trust
An A-B trust and a QTIP trust can both appear in married-couple estate planning. An A-B trust focuses on dividing trust shares after death. A QTIP trust focuses on spouse income rights and controlled remainder beneficiaries under specific tax rules.
Either structure should be coordinated with wills, account titles, beneficiary designations, and the broader estate plan.
The Bottom Line
An A-B trust is an estate-planning structure that can divide assets into separate trust shares after the first spouse dies. It can still be useful, but older plans should be reviewed because tax rules, exemption amounts, and family needs may have changed.