How to Reduce the Estate Tax Using the A-B Revocable Living Trust

In a past article I relayed the plight of the widow who stated:

"I didn't realize what an A-B Revocable Living Trust meant and that it had to be divided between the survivor and the deceased spouse and that I am limited as to what I can use from his share."

She told me that she only learned of this after her husband passed away. This is too late for many (there is a way to collapse an A-B Revocable Living Trust, which we'll talk about in another article).

First, what is an A-B Revocable Living Trust? I spend a great deal of time going over this in my free Multi-Media Course, available at http://www.livingtrustsecrets.com. Basically it is the splitting of a husband and wife's estate into two shares, his share and her share. The reason is to capture, or use, the estate tax unified credit amount that each spouse receives on death.

Let's explain. Since we know Uncle Sam likes to receive his inheritance too, whenever there is a death, we always need to ask "is there a tax?"

When we talk about taxes on death, we are talking about the federal estate tax (your state may also have a tax, sometimes called an estate tax or an inheritance tax. The difference is who is liable for payment of the tax? the estate or the inheritor? But let's not get side-tracked on the state tax. Let's stick with talking about the federal estate tax).

So let's say you have a "simple will." In a simple will, you will usually say "when I die, leave everything to my spouse." Very Simple.

Now, is there a federal estate tax? First, realize that the passing of property on death is a privilege and not a right. Therefore, it is taxable event. Even though it is a taxable event, however, the tax code tells us that everything that is left to our spouse is tax-free under what is called the "marital deduction." So, in our simple will example, there would be no estate tax since everything you leave to your spouse is tax free.

Uncle Sam is patient. He is willing to wait until the second spouse to die passes away. Now, he gets to collect his tax on the total of both shares: the husband's share and the wife's share.

What happened with the "simple will" is that you have wasted the federal estate tax unified credit amount (currently $1.5 million) that can be left tax free to anyone.

So, what the A-B Revocable Living Trust is designed to do is to capture and preserve the federal estate tax unified credit amount available when the first spouse dies. It does this by creating what is often called the "credit shelter" trust.

The "credit shelter" trust (the "B" trust in an "A-B" Trust) is an irrevocable trust that springs into being out of your Revocable Living Trust when the first spouse dies. This trust is designed to be managed by the surviving spouse for the benefit of the surviving spouse, without giving the survivor any "taxable incidents of ownership."

What this accomplishes is that upon the death of the second spouse to die, the assets that had been placed into the "credit shelter" trust are not considered to be owned by the second spouse to die. Therefore, they are not included in or taxed as part of the second spouse to die's estate.

This can often save hundreds of thousands of dollars, since the federal estate tax rate kicks in at 37% and goes up from there.

Good luck and until next time,

Phil Craig

P.S. Feel free to forward this on to any friends.

Phil Craig is a licensed attorney and entreprenuer. He started practicing law at age 25 in 1979. He does not take on any more clients, but is advisor to some of the biggest names in the internet world. He shares his knowledge gained over the last 25 years at his Living Trust Secrets newsletter site: click here=========>http://www.livingtrustsecrets.com

** Attn Ezine editors / Site owners ** Feel free to reprint this article in its entirety in your ezine or on your site so long as you leave all links in place, do not modify the content and include our resource box as listed above.

If you do use the material please send us a note so we can take a look. Thanks.

green cleaning service Park Ridge ..
In The News:

A groundbreaking new study has uncovered disturbing AI blackmail behavior that many people are unaware of yet.
Four teams of autonomous humanoid robots competed in China's first AI soccer tournament, demonstrating advanced capabilities in ball detection and independent decision-making.
The ID. Buzz autonomous van features self-driving technology with 13 cameras, nine LiDAR units and five radars after Volkswagen partnered with Hamburg and Uber for 2026 deployments.
Social Security phishing scams use urgency and impersonation to steal personal data. Learn how to spot fake SSA emails and implement 10 protective measures.
French startup Pazzi Robotics created an AI-powered pizza robot that made pies in under five minutes without human help, but it closed in 2022 despite patents and expert partnerships.
Reclaim your time from big tech with effective screen time reduction strategies for iPhone and Android, featuring steps to limit app usage and create phone-free zones.
Amazon Prime Day shoppers face threats from 120,000-plus scam websites as cybercriminals prepare phishing traps and malware ahead of the July sales event.
Fox News' AI Newsletter brings you the latest on this rapidly evolving technology.
The AEON humanoid robot tackles labor challenges with Nvidia AI, Microsoft Azure cloud and advanced spatial awareness, working alongside industry leaders Schaeffler and Pilatus.
Google's Ask Photos feature brings AI-powered searches to your photo library, letting you find memories with natural language queries while maintaining privacy controls.
The return of blue book exams emerges as universities fight widespread AI academic dishonesty and educators debate whether to ban AI tools or teach responsible usage.
Signs your phone might be hacked include strange behavior, unauthorized texts, battery drain and pop-ups, while protection involves updating software and avoiding public Wi-Fi.
Tokyo startup H2L has launched Capsule Interface technology enabling full-body robot control with muscle sensors, offering immersive remote operation.
The A.I. industry seems set for growing pains as Big Tech companies scramble for solutions to the medium's unprecedented strain on the power grid.
Fourth of July fireworks cause a 60% spike in lost pets, but GPS trackers and AI photo-matching services like Love Lost can help reunite missing dogs with their families.
Protect yourself from jugging, the rising crime by which thieves monitor ATM users and follow them to steal cash, with six practical safety tips to stay alert and secure.
U.S. airlines like Delta, American and United are selling your domestic flight records to government agencies through the little-known Travel Intelligence Program.
Autonomous robots from Uber Eats are rolling out across U.S. cities, featuring LIDAR sensors, secure compartments and all-weather operation for food and grocery delivery.
Costco has expanded into EV infrastructure with new ultra-fast charging stations that can charge most electric vehicles to 80% in 20-60 minutes while shoppers browse the warehouse.
The new Gemini Robotics On-Device AI allows robots to perform complex tasks without internet, offering enhanced privacy, reliability and adaptability for real-world use.
Protect yourself from Amazon phishing scams by spotting red flags like suspicious sender addresses and spelling errors while using Amazon's Message Center to verify communications.
GAC Group's new Govy AirCab flying car combines lightweight design with advanced safety systems and smart cabin technology to revolutionize city travel with an 18.6-mile range.
The Berkeley Humanoid Light (BHL) is a lightweight, open source humanoid robot that anyone can build using 3D-printed parts and off-the-shelf components.
Meta’s new AI chatbot is getting personal, and it might be sharing more than you realize.
A new threat targets both Android and iPhone users: SparkKitty, a powerful mobile malware strain that scans private photos to steal cryptocurrency recovery phrases and other sensitive data.

Business Tax Deductions

As we enter mid-March, taxpayers begin to become very interested... Read More

Early Distributions From Retirement Plans

An early distribution from an Individual Retirement Arrangement (IRA) or... Read More

Save Money on Taxes - Double Your Income Now With Tax Saving Tips on Deductions

Adding Your First Additional Stream of IncomeMost new wealth builders... Read More

How To Get An Instant Pay Raise

As a gentleman was leaving my class recently, he wanted... Read More

Are You An Innocent Victim of These Popular Myths?

Misconceptions, misinterpretations and just plain "untruths" are floating about income... Read More

Another Tax Loophole

Just image, you are a small manufacturing company, business has... Read More

Hurricane Katrina ? How To Use Your Business Loss To Get A Refund on 2004 Taxes

With the massive losses caused by Katrina, the economy of... Read More

Six Urban Myths About Taxation

Six Urban Myths ? Taxation"I am proud to be paying... Read More

History Of The Federal Income Tax

The powers of Congress, and the limitations set upon those... Read More

Render Unto Caesar

Once a year Canadian taxpayers are required, by law, to... Read More

Know A Tax Cheat? Get Paid To Tell The IRS

According to the IRS, taxpayers underpay their taxes by some... Read More

Reducing Taxes Through Dividend-Salary Mix Calculations

Should I take wages or dividends from my privately owned... Read More

Euro Tax Haven Threat

Media reporting of a new EU savings tax directive has... Read More

How To Get An Extension To File Your Business Tax Returns

Yes, the tax season is upon with the first filing... Read More

How To Set Up A Tax-Saving Bookkeeping System

One of the most important, but least understood or appreciated... Read More

Deducting Points On Home Refinances

Deduction of Refinance PointsAny points that you pay in the... Read More

Tax Audits: What Signs Make You More Likely to be Audited by the IRS?

It's a major fear for most Americans: A notice from... Read More

What the Tax Software Companies Dont Want You to Know

Haven't done your taxes yet? No problem. Now there is... Read More

10 Thoughts on Tax Offer in Compromise

Beware of advertisements that claim to settle tax debts for... Read More

How to Donate Your Car to Charity and Get Tax Deduction

Donating your used car to charity is a win-win situation;... Read More

Tax Tips - Which Tax Form Is Right For Me?

IRS Tax forms can be confusing.Am I a 1099 or... Read More

Tax Trap #5 -- Ignoring The IRS (and the 5 best ways to contact them!)

We all love to criticize the IRS, don't we? And... Read More

What to Do If You Can?t Pay Your Taxes

The end of tax filing extensions is quickly approaching. What... Read More

Rental Property Tax Deductions

Own residential rental properties? This article discusses how income from... Read More

Seven Key Tax Deductions for the Self Employed

As a sole proprietor, it's wise to familiarize yourself with... Read More

emergency cleaning services Morton Grove ..