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An older trust may complicate your life

Posted by Darin Wilmert | Sep 12, 2013 | 0 Comments

It was not uncommon during the 90's for married couples to have a type of trust called an “A-B Trust” or even an “A-B-C Trust”. Because the amount of money that a deceased person could pass on to heirs was relatively low in past years these trusts became very popular.

Using these trusts, when one spouse passed away, the entire estate would split into two, three, or sometimes more sub trusts. The entire point of this was to allow the couple to use both spouse's estate tax exclusion, to double the amount that could be passed on with no estate tax.

While this worked well for that purpose, it sometimes resulted in unintended and negative side-effects. For example, a surviving spouse might want to change beneficiaries after the first spouse passed away, only to find out that half of the estate was locked into an unchangeable sub-trust. Or, the surviving might suddenly have ongoing obligations to account to her own children about what was happening with the assets in one or more of the sub-trusts.

Thankfully, the amount that can be passed on with no estate tax has increased dramatically, and is not set to permanently increase with inflation, making the traditional “A-B Trust” largely unnecessary in the majority of situation. There is also the opportunity for many couples to use a “portability” feature, allowing the doubling of a single person's exclusion amount without resorting to splitting the trust and incurring additional administrative hassle. With all of that said, there are still certain situations where the ability to split the trust when one spouse passes away is very desirable, particularly with blended families who need to assure that certain changes are not made after one spouse is gone.

The estate planning attorneys of Lopez & Wilmert, LLP take your individual situation and circumstances into account when drafting estate plans, so that the plans work best for you and your situation and desires. If you have an older estate plan, and you wish to have it reviewed, please contact us at 619-589-1112 to schedule an appointed either by phone or in one of our San Diego County offices.

About the Author

Darin Wilmert

Darin has practiced before federal and state trial and appellate courts in several southern California counties including San Diego, Riverside, and San Bernardino. He most often appears on Trust and Estate matters, but lends his expertise with research, writ, and motion drafting to all of the fir...


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