Blog

The ABC’s of ABC… TRUSTS in California

Estate planning attorneys love acronyms.   Or maybe I should say WJLT… we just love them.  AB, ABC, ABCD, Q-TIP, Q-DOT, GRAT, GRUT, CRUT, CRAT, ILIT, GRIT, FLiP, and I could go on and on.  However, the ABC trust is a standard estate planning device and is really pretty simple.

In the simplest terms an ABC trust is a trust that divides into 3 shares at the first spouse’s death. Can you guess what the shares are often called?  Yes, “A Trust,” “B Trust,” and “C Trust.”  Or sometimes “Trust A,” “Trust B,” and “Trust C.”  Or sometimes “Survivors Trust,” “BY-Pass Trust” and “Family Trust.”

The A Trust is completely revocable and amendable by the surviving spouse typically. It’s THEIR money.

The B Trust is IRREVOCABLE (it can NOT be changed) and the provisions differ on how the money pays to the surviving spouse but typically it’s all income with the ability to invade principal for health, education, maintenance and support. The B Trust is included in the taxable estate of the first spouse to die.

The C Trust is also IRREVOCABLE and often has similar provisions to the B Trust.  The C Trust is generally “Q-Tipped” to be included in the surviving spouse’s taxable estate.

More questions on ABC trusts let me know.  -John

Ratings and Reviews

10.0John Bernard Palley
Wealth Counsel Member
2015 Best of the Best Badge