AB trust
A trust that allows couples to reduce or avoid overall. Each spouse puts property in the AB trust. When the first spouse dies, his or her half of the property goes to the named in the trust — commonly, the couple's grown children — with the crucial condition that the surviving spouse has the right to use the property for life and is entitled to any income it generates. The surviving spouse may even be allowed to spend principal in certain circumstances. When the surviving spouse dies, the property passes to the trust beneficiaries. It is not considered part of the second spouse's for estate tax purposes. Using this kind of trust keeps the second spouse's taxable estate half the size it would be if the property were left directly to the spouse. (See also: bypass trust, credit shelter trust)
Category: Wills, Trusts & Estates → Estate Tax

Nolo’s Plain-English Law Dictionary. . 2009.

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