Is an AB Trust Irrevocable? An AB Trust is revocable until one spouse in a married couple dies. At that point, part of the assets are put into a revocable Trust for the surviving spouse; while the other portion goes into an irrevocable Trust on behalf of the deceased spouse.

What is the advantage of an AB trust?

An A-B trust minimizes estate taxes by splitting the estate into a survivor portion and a bypass portion. The surviving spouse has limited control over the decedent’s trust but the terms of the decedent’s trust can be set to allow the surviving spouse to access the property and even draw income.

What is the difference between a Bypass Trust and a survivor’s trust?

A Bypass Trust is a sub-Trust that becomes irrevocable after the first spouse dies. Once the surviving spouse dies, the assets in the Bypass Trust go to the ultimate beneficiaries (which are usually the children of the first spouse to die). A Survivor’s Trust, on the other hand, is often revocable.

What happens to an AB trust when the first spouse dies?

The trust allows avoidance of estate tax when the first spouse dies. When the first spouse dies, the trust transforms into two trusts: an irrevocable living trust in the name of the deceased spouse and a revocable living trust in the name of the survivor. Here’s an AB trust example. John and Mary are married and set up an AB living trust.

When does an AB trust need to be set up?

An AB trust is a joint trust set up by a husband and wife that controls how their property is distributed after each of their deaths. The trust allows avoidance of estate tax when the first spouse dies.

How is an AB living trust settlor created?

An AB living trust is created by two settlor spouses create one trust that is then divided into two separate trusts within the one document, an “A Trust” and “B Trust.”

What to do if you revoke an AB Trust?

You’ll need to transfer any property in the trust back into your own names. Sign a document stating that you revoke the trust. As an alternative to your AB trust you might wish to create a simple revocable living trust, using living trust forms. This allows you to avoid probate but avoids some of the complications of an AB trust.