It’s easy to become overwhelmed by the different options when planning your estate. There are many types of wills and trusts that are available to estate planners, but the right choice for you will depend largely on your specific financial situation, as well as what your last wishes and financial intentions are.

If you are a married couple, there are ways that you can take advantages of certain clauses of the law. For example, you may be able to maximize your estate tax federal exemptions by the inclusion of AB trusts. AB trusts are a system of trusts. An A Trust is often known as a “marital trust” and a B trust is otherwise referred to as a “bypass trust”.

How does the law work when it comes to AB trusts?

A new opportunity arose from a tax exemption perspective in 2011 when it was made possible for federal tax exemptions to be transferred between married couples. This essentially means that married couples can transfer a certain amount of assets to the heirs without being subject to estate taxes, without the use of AB trusts.

However, AB trusts can still be beneficial in many other ways. AB trusts can be very useful for married couples who each have children from previous marriages. They will likely want to keep some of their assets separate in order to be inherited by their respective heirs, and setting up AB trusts can make this possible.

How can AB trusts be set up?

AB trusts can be set up through using the appropriate terminology in an estate planner’s will or trust. This should be done with professional assistance. After this, assets must be divided equally between each spouse’s living trusts. If joint accounts are used in conjunction with the correct terminology on a will or trust, the AB trust system will cease to be legally enforceable.

If you are planning your estate alongside your spouse, AB trusts could be a great option to allow flexibility in making sure that your last wishes will be executed.