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Tom Meaglia, ChFC®, AEP®,
CLU®, CRPC®, MSFS
Chartered Financial Consultant
Investment Advisor Representative
Chartered Retirement Planning Counselor
CA Insurance Lic. #0567507
Meaglia Financial Consulting
2105 Foothill Blvd., #B140, La Verne, CA 91750
Toll Free: 800-386-3700
Bus: 909-593-6105
Cell: 818-681-8600
Fax: 909-593-6120
Email: tom@meagliafinancialconsulting.com
Website: www.meagliafinancialconsulting.com
May/June 2023
Do You Need a Trust?
While trusts are often complex, they offer high net worth families and individuals tax advantages and more control over how their assets are distributed to future generations. One of the more common and effective trusts used to accomplish these twin goals is an AB trust, which is also known as a credit shelter or bypass trust. This type of trust begins as a revocable trust, when you can make changes, and ends as an irrevocable trust.
When families and individuals want to retain some control over how their assets are distributed after they’re gone while limiting the corrosive effect of estate taxes, any one of a variety of irrevocable trusts can accomplish this. Irrevocable trusts also shield assets named in these trusts from the public glare of probate court, while dictating how your estate will provide for family going forward.
AN AB TRUST IS A DUAL-PURPOSE VEHICLE THAT CAN ALLOW YOU TO PROVIDE INCOME TO A SURVIVING SPOUSE WHILE EVENTUALLY PASSING ON TAX-ADVANTAGED ASSETS TO BENEFICIARIES.
Multiple Advantages
How does this trust work? Part A of the trust provides income to the surviving spouse. When the second spouse dies, Part B kicks in for the benefit of the second spouse’s estate and becomes irrevocable.By dividing asset ownership among both spouses, the trust ensures the couple receives the maximum federal estate tax exemption, or credit, which in 2023 is $12.92 million per individual. This is key because a couple can lose part of one spouse’s exemption if they haven’t used it all.
While the estate can allow the surviving spouse to use the deceased spouse’s remaining exemption, it has some limits. The AB trust provides more control, but it doesn’t apply to the GST tax exemption and isn’t recognized by some states.
An AB Trust can offer control, maximize tax credits and help ensure that assets pass to beneficiaries as intended.
If you want to leave financial means to a spouse after your death while also ensuring other beneficiaries ultimately receive the remainder of tax-advantaged assets, the AB trust is one way to achieve this.
Consult an estate planning attorney and your tax and financial professionals to learn if this type of trust is appropriate for your situation.
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Thomas Meaglia is an Investment Adviser Representative of Coppell Advisory Solutions LLC, dba, Fusion Capital Management, a registered investment adviser that only conducts business in jurisdictions where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. The firm is not engaged in the practice of law or accounting.
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