What is an AB Trust?
An AB Trust, sometimes called a Credit Shelter Trust, a Marital Bypass Trust or an Exemption Trust, is a powerful estate-planning tool. It allows couples to reduce or avoid estate taxes. Under current law, the estate tax will be gradually phased out until 2010, when it will be repealed. Unless additional legislative steps are taken, it will be restored in 2011. Because an AB Living Trust is flexible and revocable while both spouses are alive, it can be modified or amended if circumstances change. Upon the death of the first spouse, the trust becomes irrevocable. The federal government exempts transfers between a husband and wife from estate and gift taxes. Consequently, the AB trust takes advantage of two tools: the unlimited marital deduction and the “unified credit.” Through 2008, the unified credit exempts the first $2 million of your estate from federal estate taxes and using an AB trust can enable a couple to pass on up to $4 million free of federal estate taxes. You can use the u
