Trust B

Trust B usually refers to a bypass trust, created to bypass some of the taxes due at first death. The trust is set up for the amount which can pass tax-free to heirs other than the spouse. This amount escapes estate taxes by using the applicable credit.

The spouse can be given the right to receive income from the trust. However, care must be taken that such rights don't cause the trust assets to be included in the surviving spouse's estate, eliminating the tax savings. At the second death, assets pass to heirs free of taxation in the surviving spouse’s estate. During the spouse's lifetime, the spouse and the heirs enjoy the benefits of professional trust management.