A-B Trust

When it comes to paying taxes, death is not the end. If you have a ton of loot you want to leave your kids, spouse, a side spouse, nephew, or pet gerbil when you die, the federal government is gonna get some of it. It’s called an estate tax. It's gentle until about 11 million bucks these days and then it gets...toothy.

Rich married couples can reduce the amount of estate tax they pay by using an A-B Trust. Let’s say Joaquin and Miranda have gobs of money, but they’re getting old and their chances of dying increase daily. To lessen their tax burden, they bust out their will and establish an A-B Trust.

Because they have an A-B Trust, when one of them kicks the bucket, half the money they possess goes into a trust and the other half goes to the surviving spouse. None of this money is taxed at this point. The surviving spouse still has his or her half and still controls income from the other half that’s in the trust. When the surviving spouse keels over, her half of the money is subject to an estate tax, but the half that was put in the trust, remains in the trust—safe from tax collectors. In short, Joaquin and Miranda legally paid half the taxes they would have otherwise paid without an A-B Trust.