A big thanks to a subscriber who sent in a question about the “Married ABC Trust” and how the tax ID numbers work.
In this video, I explain how the trust works while both members of a married couple are alive, and then how the tax-saving A, B, and C subtrust “compartments” work when the first spouse passes on. In addition, in setting up these subtrusts, can you use social security numbers or do you need separate tax ID numbers? Let’s find out.
What Exactly Does That ABC Part Mean?
I generally tend to use the ABC just because it is going to take care of as much of an estate tax problem as possible. When you have a married US citizen couple (both are US citizens), and they have a married ABC trust, while both of them are alive any assets put into the trust are owned overall by this trust. There is no compartment, no A, no this person owns this and this person owns that.
It is controlled by both of them as trustees. The way I draft it and the way it is usually the default of the company I affiliate with, you can use whichever social security number you want for either one of that couple. It has to be written into the trust language that this is an acceptable way to do it. You don’t need a separate tax ID number at this point. And because it is drafted that way, you don’t need to pick a social security number for one or the other of that couple that is going to be on all of the accounts.
What happens when one person of the couple passes on?
Here’s where we have things kick in for tax savings. There are some ways you can have the trust where the money has to be divided between the A and the B. The way my office typically does it is that it all goes to the surviving trustor’s revocable trust A, so they can then decide to put up to half over here into that decedent trustor’s irrevocable trust B. This is where the tax savings come in.
Find out how and much more by listening to the entire video here.