Backdating allocation of marital assets into survivor trust

If one spouse dies, the unused portion of his or her estate tax exemption can be transferred and added to the estate tax exemption of the surviving spouse.Upon the death of the surviving spouse, the property in the decedent's trust passes tax-free to the beneficiaries named in this trust.

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The estate tax on the A trust is deferred until after the death of the surviving spouse.

To circumvent the estate from being subject to such steep taxes, many married couples set up a trust under their last will and testaments called an A-B trust.

Following the example above, if the couple instead had an A-B trust, the death of the first spouse will not trigger any estate taxes as a result of the lifetime exclusion.

No estate tax calculation is performed on assets held in the Survivor’s Trust until the Surviving Spouse dies.

The process for “funding” the Survivor’s Trust, that is, the actual transfer of title to the Survivor’s Trust after the death of the first spouse, is similar to the process for funding the Bypass Trust discussed in the last issue.

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