ABC Trust

An ABC trust is created for married couples and is designed to provide for both spouses during their respective life times. Think of an ABC trust as three trusts in one. During their respective lives, both spouses have a trust (perhaps trust A for the husband and trust B for the wife). The property of the spouses is then placed in those respective trusts. As with other revocable trusts, each spouse is able to manage and enjoy the benefits of their trusts as they wish during their lives. For example, each spouse can add assets to or remove assets from the trust during life. Then, when one of the spouses dies, the assets pass as directed by the terms of the trust. Usually, they pass half to the remaining trust (i.e., the C trust), and the other half to the surviving spouse’s trust. The surviving spouse enjoys the income of trust C during his or her life. Then, when the surviving spouse also passes away, the assets remaining in his or her trust also passes to the C trust. The assets of the C trust then pass as the two spouses jointly determined when they prepared the trust.

Although the spouses can agree that the beneficiaries of the trust may be changed while they are both alive, once the first of them pass away the C trust becomes irrevocable. This way, the surviving spouse is not able to redirect the assets of the first to die to a different beneficiary than was intended by the first spouse to die.

The benefits of such an estate is that it permits spouses to care for the survivor while at the same time providing security that the surviving spouse will not dispose of assets contrary to the wishes of the first spouse to die. This can be a very important tool when spouses have children from a prior relationship.

If you have further questions about the benefits of a revocable or ABC trust, contact Daniel Geraldi at (925) 364-4741.