There are different types of trusts for estate planning. ABC Trusts are one created for the benefit of surviving spouses and accounts for differences in all tax exemptions. Below is an information on MA ABC trusts and its advantages.
Benefits of ABC Trusts
ABC Trusts are a type of irrevocable trusts. They are helpful in states where the estate tax exemption level is less than the federal exemption and the estate value exceeds all exemption levels. It allows an estate to fully use federal exemptions and defer a certain amount of state taxes until after the surviving spouse passes away.
Usage of ABC Trusts
ABC trusts divide assets into 3 trusts. Assets under the state exemption are placed into a B trust. The remainder of assets up to the federal exemption level can be then placed into the C trust. Anything above the federal exemption go into the A trust. For example, if you have an estate of 7 million dollars and live in a state where the tax exemption of 1 million (compared to the federal 5 million exemption). You may do the following:
- 1 Million into a B Trust
- 4 million into an C Trust
- 2 million into a A Trust
The B and C trusts benefit from the federal exemption. The B trust is exempt from state taxes. The C trust defers state taxes until the surviving spouse dies. The A trust is subject to both state and federal estate taxes.
Help With ABC Trusts for MA
This information on MA ABC trusts is only a basic explanation. There are several other options to consider when it comes to planning an estate. For additional assistance, it is important to speak with a local MA estate planning attorney. Your attorney can analyze your specific situation, explain all of the alternatives, analyze tax implications, and develop a plan that best suits your goals. Feel free to contact John Martino at Martino Law Group by calling 781-606-9002 with questions.