What is an A/B trust, and how do you know if it’s right for financial advisors’ clients

Does an A/B trust make sense for my clients

For a long time, the A/B trust (also known as a bypass trust and marital trust structure, or a credit shelter trust arrangement) was standard planning for married couples with meaningful assets. It wasn’t a strategic decision so much as a default move. If you had wealth, you had some version of this structure in place.

That’s no longer true.

Changes to estate tax law, especially the introduction of portability and significantly higher exemption amounts, mean the A/B trust is now situational. It still solves real problems, but only in the right situations. Most explanations stop at how the trust works. The more important question is whether it’s doing anything useful for your situation.

What an A/B trust actually is

An A/B trust is a structure used by married couples that splits assets into two shares after the first spouse dies. One portion, often called the marital or “A” trust (often referred to simply as a marital trust), is designed for the benefit of the surviving spouse and typically qualifies for the marital deduction. The other portion, known as the bypass or “B” trust (also called a credit shelter trust or family trust), is funded using the deceased spouse’s estate tax exemption and is generally structured to stay outside of the surviving spouse’s taxable estate.

The surviving spouse can still benefit from both trusts depending on how they are written, but the key distinction is what gets pulled back into the estate later and what does not. That distinction is what drives the tax outcome.

At a practical level, the structure is doing two things at once. It uses the first spouse’s exemption instead of wasting it, and it removes future growth on certain assets from the surviving spouse’s estate. That second piece is often overlooked, but it’s where a lot of the long-term value actually comes from.

Why A/B trusts became so common

Before portability existed, everything passing outright to a surviving spouse could defer estate tax, but it also meant the first spouse’s exemption could effectively disappear. That created a problem at the second death, when the entire estate might be taxed without the benefit of both exemptions.

A/B trusts were the workaround. By funding a bypass trust at the first death, the plan locked in the use of that exemption immediately and ensured those assets would not be taxed again later.

For years, that made the structure almost automatic.

What changed: portability

Today, federal law allows a surviving spouse to use a deceased spouse’s unused estate tax exemption through portability. This election is not automatic. It requires filing a timely estate tax return, even if no tax is due. As of 2026, the federal exemption is $15 million per person, which means a married couple can potentially shield roughly $30 million without relying on an A/B trust.

That shift removed the need to default to a bypass trust in every plan. But it didn’t eliminate the reasons those trusts existed.

Where portability falls short

Portability preserves an exemption. It does not create structure.

It doesn’t control where assets go, how they are used, or what happens if circumstances change after the first death. It also does nothing to remove future asset growth from the taxable estate, and it does not apply to generation-skipping transfer tax planning.

That gap is where A/B trusts still come into play. Not as a tax default, but as a way to manage outcomes over time.

The tradeoffs that actually matter

Most simplified explanations treat this as a yes or no decision based on estate tax exposure. In reality, it’s a balancing act between competing priorities.

One of the most important is the tradeoff between estate tax planning and income tax basis. Assets included in a taxable estate typically receive a step-up in basis at death. When assets are placed in a bypass trust and excluded from the surviving spouse’s estate, that second step-up is often lost. In many cases, that tradeoff matters more than the estate tax benefit.

There is also a tension between simplicity and control. Portability keeps everything straightforward. Assets pass outright, and the surviving spouse retains full flexibility. An A/B trust introduces structure, which can protect intent but also limits flexibility. Whether that’s a benefit or a drawback depends entirely on the family.

Growth expectations matter as well. If assets are likely to appreciate significantly, keeping that growth outside of the estate can be valuable. If not, the administrative burden of maintaining a bypass trust may not justify itself.

State-level considerations complicate things further. Some states impose their own estate taxes with lower thresholds and different rules around portability. In those cases, a bypass trust may still serve a clear purpose even when federal exposure is not a concern.

When an A/B trust tends to make sense

There are still situations where this structure holds up well under scrutiny. It tends to be more relevant when the goal is not just minimizing tax, but preserving control and managing risk across time.

It often fits best in scenarios like:

• estates that are large or expected to grow significantly
• blended families where beneficiary intent needs to be preserved
• situations where remarriage or future changes could alter outcomes
• cases where structured distributions or asset protection are priorities
• exposure to state estate tax systems with lower thresholds
• multi-generational planning where GST considerations matter

In these cases, the trust is doing more than saving tax. It’s shaping how assets behave after the first death.

When does an A/B usually not make sense

For many couples, the structure introduces more complexity than benefit. This is especially true when the estate is well below any likely tax threshold, the family structure is straightforward, and there are no major concerns around control or future changes.

In those situations, portability combined with a simpler trust or will-based plan can achieve the same outcome with less administrative friction. It also preserves flexibility for the surviving spouse and may produce better tax results through a second basis adjustment.

What are common A/B trust misconceptions

A/B trusts are often explained using shortcuts that don’t hold up well.

They are not about “avoiding double taxation” in a literal sense. They are about using exemptions and controlling what gets included in a taxable estate. They also do not require splitting assets evenly. Funding is typically driven by formula clauses tied to exemption amounts, not arbitrary percentages.

And while they are less common than they once were, they are not obsolete. They are simply no longer the default answer to every estate planning question.

What client circumstances make an A/B trust more appropriate

The decision comes down to what problem you actually need to solve.

If your situation is relatively simple, your estate is unlikely to face tax exposure, and flexibility for the surviving spouse is the priority, an A/B trust may not add much value. If, however, control, protection, or long-term planning across generations matters, the structure may still be worth the added complexity.

The decision is less about the trust itself and more about how your assets, your family, and your risks interact over time.

What should advisors do with this information

The A/B trust didn’t go away. It just stopped being automatic.

What replaced it is not a single alternative, but a more nuanced decision process. Portability, basis planning, family dynamics, and state-level rules all play a role. In some cases, the simplest plan is the right one. In others, structure still matters.

Most estate plans don’t fail because the structure was wrong. They fail because no one thought carefully about what happens after the first death. That’s the gap an A/B trust is designed to address, when it’s used on purpose.

Understanding whether that applies to you is less about knowing how the trust works and more about how it fits your specific situation. Tax exposure, asset mix, and family dynamics all shape the outcome, and small differences can materially change the right approach.

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