Using AB Trusts or ABC Trusts to Protect Your Spouse

Asset Protection Planning for Your Spouse

1. AB Trusts and ABC Trusts are irrevocable.

The A, B and C Trusts are irrevocable and so any assets owned by them will be protected from creditors and lawsuits. Aside from this, any assets owned by the A, B and C Trusts will be protected from a divorce settlement if your spouse remarries and later divorces.

2. The B Trust can be preserved for your children or other beneficiaries.

The B Trust can be drafted to take care of your spouse during his or her remaining lifetime but also to protect the principal for the benefit of your children or other beneficiaries. This is particularly important if you and your spouse have a blended family and you each have a different set of final beneficiaries.

3. The B Trust helps to reduce your estate tax bill.

What is left in the B Trust will not be subjected to estate taxes when your spouse later dies. This could become really important if the estate tax exemption is allowed to revert back to the 2002 amount of $1,000,000 - then there will not be any possibility that an estate tax will be due on the B Trust even if your spouse's separate estate ends up being taxable.

What should you do?

If you are in the process of putting your estate plan together, then you will need to let your estate planning attorney know up front that asset protection for your spouse should be built right into your plan. On the other hand, if you already have an estate plan but have not considered all of the benefits of protecting your spouse after your death,then you will need to sit down with your estate planning attorney to revise and update your current plan to include asset protection through AB Trusts or ABC Trusts.