In most cases involving estate taxation in Florida, the taxes are levied before the assets are passed to the beneficiaries. One way married spouses could avoid some of that tax burden is to establish an AB trust. An AB trust is an estate planning structure whereby a couple sets up irrevocable trusts and their assets pass into the trusts upon their death. It is a common belief that this structure is only helpful to people who have large estates, but it can actually benefit anyone who may be required to pay estate tax.
An AB trust is usually set up so that when the first of the spouses dies, his or her estate will be transferred into an irrevocable trust with the children as the owners. However, the trust property is used for the advantage of the surviving husband or wife. When the surviving spouse passes away, then all of the property transfers to the trust beneficiaries, usually the couple’s children.
The rights of the surviving spouse may include receiving all trust interest, use of trust assets and spending in certain specified ways. Generally speaking, the surviving spouse might use the trust principal to pay for support and maintenance, health, education and standard of living expenses. The surviving spouse holds these rights until the time of his or her death, which is when the trust property is transferred to heirs.
A Florida resident who has questions about the operation of an AB trust or would like to review their estate plan might want to talk with a lawyer. The estate planning attorney may be able to help by explaining a variety of options related to wills, trusts and more.