When it comes to estate planning, many clients ask, “Do I still need an AB Living Trust?” With changes to federal estate tax laws and the introduction of portability, some estate planners have declared AB trusts obsolete. But is that always true?
As with most legal and financial strategies, it depends on your specific situation. In this article, we’ll explore what AB trusts are, how they work, how they compare to newer planning tools like portability, and the circumstances in which an AB trust may still play an essential role in your estate plan.
What Is an AB Living Trust?
An AB Living Trust (also called a marital and bypass trust) is a revocable trust created by a married couple to avoid probate and reduce estate taxes. When one spouse passes away, the trust typically divides into:
- Trust A – The survivor’s trust
- Trust B – The bypass or credit shelter trust
Assets in Trust B are excluded from the surviving spouse’s estate, potentially reducing estate taxes upon the second death.
Why Were AB Trusts Popular?
Before 2010, the federal estate tax exemption was much lower. AB trusts allowed couples to double their exemption and reduce estate tax liability significantly by using both spouses’ exemptions.
The Game-Changer: Portability
What Is Portability?
Portability allows a surviving spouse to inherit the unused federal estate tax exemption of the deceased spouse, without needing a bypass trust. This became permanent in 2013.
Example: If the estate tax exemption is $13.61 million and the deceased spouse used $5 million, the surviving spouse can port the remaining $8.61 million—bringing their own exemption up to $22.22 million.
How to Elect Portability
To elect portability, the executor must file IRS Form 706 (Estate Tax Return) within the deadline:
- Within 5 years of death (if the death occurred after July 8, 2022)
- Form 706 must be filed even if no estate tax is owed
Missing the deadline means you lose the unused exemption.
Are AB Trusts Now Obsolete?
Not entirely. There are still several reasons why AB trusts are worth considering:
✅ When AB Trusts Make Sense
- You expect the estate tax exemption to drop in 2026 or later
- You want to protect assets from a surviving spouse’s creditors or future spouse
- You want control over how assets are distributed after the first death
- You live in a state with estate taxes below the federal level
- You want to avoid the risk of missing the IRS Form 706 deadline
⚠️ When AB Trusts May Be Overkill
- If your estate is well below the federal exemption, the complexity may outweigh the benefits
- The surviving spouse must manage two trusts and file additional tax returns
- No step-up in basis on Trust B assets upon the second death (unlike portability)
The Bottom Line
Every estate is different. The right solution depends on your assets, your family dynamics, and your goals. AB trusts can still be a powerful tool—but only if they’re right for your situation.
Consult an Experienced California Estate Planning Attorney
At C.M. Brainard & Associates, we help individuals and families across California design smart, strategic estate plans tailored to their needs. Whether you're evaluating an AB trust, filing IRS Form 706, or creating a new trust from scratch, we’re ready to help.
📲 Text or call to schedule a consultation: (310) 266-4115
🌐 www.LawBrainard.com
*This article is provided for informational and educational purposes only and does not constitute legal advice. Reading this article does not create an attorney-client relationship between you and Christopher Brainard, Esq. An attorney-client relationship can only be formed through a written and signed agreement with Christopher Brainard. If you need legal advice about your specific situation contact us for a consultation. [Christopher Brainard, 8549 Wilshire Blvd., Beverly Hills, CA 90211. Tel: (310) 266 - 4115. Email: christopherbrainard@gmail.com].*