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The Difference Between an A-B Trust and a Disclaimer Trust in San Diego

What is the difference between an A-B trust and a disclaimer trust in San Diego?  The classic A-B trust has been around for years.  The A-B trust was developed for spouses, and places the property, investments, accounts and assets of a married couple into a revocable trust known as an A-B trust.  the “A” refers to the first spouse to pass, and the “B” refers to the surviving spouse.   In the A-B revocable trust, when the first spouse passes half of the couple’s assets are placed into an “irrevocable” trust, until the passing of the second spouse.  These assets are preserved until the passing of the second spouse at which time the assets in the “irrevocable trust (A) are combined with the remaining assets (B) of the surviving spouse and distributed to the beneficiaries, heirs and charities that were important to the spouses per the directions of the A-B trust.  This model was widely used as the basis of most California revocable trusts for spouses until the past several years.

A “disclaimer trust” differs from the “A-B” trust in an important manner: the disposition and protection of the assets of the married couple after the passing of the first spouse.  With a disclaimer trust, the surviving spouse has the opportunity to decide exactly how much of the joint assets to “disclaim” and place into an irrevocable trust.  This provides much more control and flexibility to the surviving spouse.  People are living longer (in general) these days, and the “B” spouse in this model may survive for many years.  The surviving spouse may very well need more than half of the couple’s joint assets to provide for living, medical and retirement expenses.

If your trust is more than three years old, it is important to have it reviewed by an experienced San Diego trust and tax attorney.  The estate planning, trust and tax attorneys at Allen Barron can explain the important distinctions between the two trusts, evaluate your existing situation, review future requirements and update your existing trust to ensure that it takes the greatest advantage of present tax laws, federal estate tax exemptions and the unique circumstances of your family.  What is the difference between an A-B trust and a disclaimer trust in San Diego? We invite you to contact us for a free and substantive consultation regarding a trust review at 866-631-3470.