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AB Trusts


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#1 artxeb

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Posted 29 July 2009 - 06:34 PM

My mother passed away mid -January and were helping Dad in thh. e process of putting the trust in an AB Trust Do we need to find stock values, home value etc. for the actual date of death or can we use a statement from the end of the month? 


#2 pg1067

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Posted 30 July 2009 - 03:02 AM

This is not something that non-lawyers should be doing, and helping your father with this may well constitute the unauthorized practice of law.  If your father wants to ensure that he obtains and maximizes the tax and other benefits of doing this, he needs to consult with competent counsel.



#3 Tax_Counsel

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Posted 04 August 2009 - 10:22 PM

Your question is not very clear. In general, the term "AB trust" is commonly used by the public and trust promoters for what tax lawyers call a credit shelter trust. A credit shelter trust is useful for couples with combined assets that are over the federal estate tax credit amount. It's purpose is to ensure that the estates of both spouses fully utilize the federal estate tax credit in order to save estate tax.

These trusts are commonly testamentary trusts, meaning they are created from the will of the deceased person. For a credit shelter trust arrangement to work, that means the trusts must be described in will of the first spouse to die, in this case, your mother's will since she died first. (Since in most cases, you don't know who will die first, the practice is to have both wills contain the necessary provisions.)

Now, assuming that the trust was in place in your mother's will and you are now working to fund the trust from her estate, then if I understand your question correctly, you want to know what date must be used for valuation of the assets. Assuming that you have a classic credit shelter trust, the valuation needs to be as of the date of death (or, if the estate uses the alternate valuation date of six months later, use that date instead). The reason is that the federal estate tax is imposed on the values of the decedent's property on the date of death or on the alternate valuation date, whichever applies. Thus, the credit shelter trust funding needs to follow the same valuation for it to work properly. The estate is going to need valuations as of the date of death or alternate valuation date anyway in order to file the federal estate tax return.

However, since I've not seen the will, I don't know whether it contains a credit shelter trust and, if it does, what funding formula was used. Thus, I cannot say for sure what needs to be done here. If they have enough assets to worry about doing a credit shelter trust, then it is foolish for you guys to try doing this yourselves. Get a tax lawyer to look it over and make sure that you get it right. If you blow it, the cost in federal estate tax will be a lot higher than the fee you pay the attorney to make sure it works properly.





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