Now, in the AB Trust, when it’s split, when I first die that half becomes irrevocable instead of revocable. And the remaining spouse is able to change their half to different beneficiaries different trustees, things like that. But they can’t change the irrevocable side. In other words, AB Trusts protect the first to die, making sure their money go where they expected it to go. Now most spouses, trust each other to do the right thing, but it’s someone the spouse s/he might meet when I’m gone that I don’t trust. So, the AB Trust at least preserves a portion of your assets.
The Disclaimer Trust is a little bit in between the A and the AB Trust. It allows the surviving spouse to construct the AB trust at that time, per their discretion. Do they usually? I don’t think so. Usually ends up all in their hands, they don’t want to mess with a B trust and doing a tax return once a year.
What is a Q-tip trust? Well q-tip trust (I won’t spend a lot of time on it) is an additional trust if you want certain assets over the exemption amount so that there’s no estate tax. So you achieve both goals. You achieve the goal of it still being the decedent’s trust for control and you see achieve in not being no estate tax on the first death. This Q-tip Trust, sometimes called the C Trust.
Funding a Living Trust
Think of your trust as a treasure chest for yourself if you’re incapacitated or for your children when you die. Your treasure chest will contain assets like real estate, bank accounts, investment accounts, business ownership of stock, an S-corp…
What about IRAs? Put trust as the beneficiary on those. Some attorneys like you to make individuals the beneficiaries bypassing the trust. The problem is if it’s a big IRA and you put the individuals as the beneficiaries, they’ll get it all at once. Do what they want with it and you may want the trustee handling it, thus leaving the trust as a beneficiary. The downside is you may end up getting a full distribution all at once to the trust after you die and could cause a little more tax at the front end. So get some advice. What about life insurance? I believe that the trust should be the beneficiary. That way the trustee can handle those assets in case of your income has to be your death.