The Benefits of A-B Trusts in Ohio

Estate planning is about protecting the people and things you care about most. For married couples, one option that often comes up is A-B trusts (also written as A B trusts or AB trusts). These trusts are designed to help families hold onto more of their assets and control how things are handled when one spouse passes away. At Gudorf Law Group, LLC, we help families in Ohio understand if this type of trust makes sense for their situation. Even though tax laws have changed over the years, A-B trusts in Ohio still offer important benefits in the right circumstances. Knowing how these trusts work and what they’re meant to do can help you make a smart decision about your estate plan.

What Are A-B Trusts and How Do They Work?

A-B trusts are a type of estate planning tool designed for married couples. When one spouse passes away, the couple’s assets are split into two separate trusts. One part, called the “A” trust, stays with the surviving spouse. The other part, called the “B” trust, holds the first spouse’s share for future beneficiaries (like children).

The main idea behind A-B trusts in Ohio is to use both spouses’ estate tax exemptions to reduce or avoid federal estate taxes. This was especially helpful before recent tax law changes made the estate tax less of a concern for most families. Gudorf Law Group can help explain whether these trusts are still a good fit for you and your loved ones.

What Are the Benefits of A-B Trusts in Ohio?

The benefits of A-B trusts include giving families more control over how assets are handled after a spouse’s death. These trusts can protect a portion of the estate for children from a first marriage or make sure assets aren’t spent down in ways the first spouse wouldn’t have wanted. At Gudorf Law Group, we’ve seen how these trusts give families peace of mind by clearly outlining what happens next.

Another key benefit is that assets in the “B” trust won’t be considered part of the surviving spouse’s estate when they pass away. This can protect those assets from future creditors or remarriage complications. Even though Ohio no longer has a state estate tax, some families still find A-B trusts helpful for these other reasons.

Do A-B Trusts Affect Capital Gains Taxes?

One thing to consider with A-B trusts is how they might impact capital gains taxes later on. Normally, when a person passes away, their assets get a step-up in tax basis, which can lower the capital gains tax owed if the asset is sold. With an A-B trust, assets in the “A” trust get this step-up when both spouses die, but the “B” trust assets only get it when the first spouse passes.

This means if the surviving spouse lives for many more years and the “B” trust’s assets grow in value, beneficiaries could face higher capital gains taxes when those assets are sold. Gudorf Law Group helps clients carefully weigh these outcomes to decide whether the benefits of A-B trusts outweigh potential tax costs in the future.

Are A-B Trusts Still Necessary Today?

Since the federal estate tax exemption is currently so high, fewer families need A-B trusts to avoid estate taxes. The introduction of portability rules also lets a surviving spouse use any unused portion of their partner’s exemption without a trust. Despite this, some families in Ohio still use A-B trusts for reasons that have nothing to do with taxes.

Gudorf Law Group works with families who value the asset protection and control these trusts provide. A-B trusts can be especially useful when one or both spouses have children from a previous marriage or when protecting assets from future remarriage, lawsuits, or creditors is a concern. Each situation is unique, and our team can explain whether this approach makes sense for your estate plan.

What Are the Pros and Cons of A-B Trusts?

When deciding whether to include an A-B trust in your estate plan, it’s important to look at both the pros and cons of A-B trusts. The benefits of A-B trusts include asset protection, clear distribution instructions, and shielding a portion of assets from creditors or remarriage risks. They also provide a way to control how wealth is passed down to future generations.

However, the potential downsides involve higher administrative costs and complexity. A-B trusts require the estate to be split into two parts when one spouse dies, which means extra paperwork, tax filings, and legal work. Gudorf Law Group can help you carefully weigh these factors to decide if this estate planning option is right for your family.

Should You Talk to an Attorney About A-B Trusts?

If you’re wondering whether an A-B trust belongs in your estate plan, it’s a good idea to sit down with an experienced estate planning attorney. Every family’s financial situation, family dynamic, and long-term goals are different. The knowledgeable attorneys at Gudorf Law Group take the time to understand what matters most to you and explain how different tools, like A-B trusts in Ohio, could fit into your plan. We know estate planning conversations can feel daunting and uncomfortable, but it’s important to ask these questions now while you have the chance. The right plan will protect the people and things you love while making sure your wishes are honored down the road.

Contact Gudorf Law Group to Discuss Your Estate Plan

Whether you’ve heard of A-B trusts before or are just learning about them now, it’s worth finding out if they could help your family. The team at Gudorf Law Group has years of experience creating estate plans for Ohio families, including those that involve A-B trusts. We’ll clearly explain the benefits of A-B trusts in Ohio, answer your questions, and help you avoid common mistakes. Estate planning is one of the most thoughtful things you can do for your loved ones. If you’d like to explore A-B trusts, the pros and cons of A-B trusts, or other estate planning tools, contact Gudorf Law Group today to schedule a consultation. We’re here to make sure your family is protected and your wishes are clearly understood.