Justin, does my Revocable Living Trust really need to split into an A and B Trust, or a Marital Trust and Family Trust, at my death? This seems complicated for my family to deal with after I am gone. – Sam
Sam, unless your estate is currently (or expected at death to be) valued at more than $5 million, the A and B Trusts commonly seen in most revocable trust plans are unnecessary under current tax laws. If you currently have a trust that splits into A and B Trusts (or a Marital Trust and a Family Trust) at the death of the first spouse, consider allowing an attorney to review your trust and your assets again to determine if your estate plan can be simplified. If you’ve named one of your children or relatives as the Successor Trustee at your death, they will appreciate your trust being as streamlined as possible.
I often see the A and B Trusts in documents when I meet with clients who had their plans set up before 2011. In 2011, the lifetime exemption from federal estate and gift taxes jumped from $1 million to $5 million per individual and has remained above $5 million ever since. Such a high exemption amount makes the A and B Trusts unnecessary for most couples.
Therefore, now may be a good time to have an attorney review and update your existing trust documents. In some cases, the provisions for A and B Trusts can be eliminated entirely. In others, those provisions can be made option, instead of mandatory, so that the tax protections afforded by those provisions can be called upon if tax laws change significantly in the future but the complications caused by those provisions can be avoided if the tax laws do not change.