Married couples planning their estate often want to know how to pass on what they have built in a way that protects the surviving spouse, supports their children, and avoids confusion later. The A/B trust is one structure California estate planning attorneys have long used to address those goals. It is not the right fit for every family, and the tax reasons that once made A/B trusts a common default have shifted as federal estate tax law has changed. This article explains, in plain language, what an A/B trust is, how it generally works under California estate planning, and what California couples may want to think about when comparing it to other options.
What Is an A/B Trust?
An A/B trust is a planning structure used inside a married couple’s revocable living trust. A revocable living trust is a trust the spouses create during their lifetimes and can change or revoke at any time. With A/B trust language, the couple’s living trust is written so that, when the first spouse dies, the trust assets are divided into two separate sub-trusts:
- Trust A, often called the survivor’s trust, and
- Trust B, often called the bypass trust, credit shelter trust, or family trust.
Each sub-trust has different rules about who controls the assets, who benefits from them, and whether the trust can later be changed.
How an A/B Trust Works in California
While both spouses are alive, the couple’s revocable living trust works like any other revocable living trust. The spouses usually serve as trustees, keep control of the assets, and can change the terms whenever they choose. California estate planning often involves additional documents, such as a pour-over will, a durable power of attorney, and an advance health care directive, but the A/B mechanics relate to how the underlying living trust is divided after the first death.
When one spouse dies, the trust language directs that part of the assets be allocated to Trust B and the rest to Trust A. The dividing line is usually tied to the federal estate tax exemption in effect at the time of the first spouse’s death, but the exact allocation formula, the dollar amount, and the way community and separate property are handled all depend on the trust document and on current law. Because California is a community property state, how property is characterized between the spouses can also affect how the assets are divided into the two sub-trusts.
After the first spouse dies, the surviving spouse generally:
- continues to manage Trust A as trustee and beneficiary, and
- works through the steps required to fund Trust B according to the trust’s terms, often with help during California trust administration.
Trust A vs. Trust B
The two sub-trusts serve different purposes.
Trust A — the survivor’s trust:
- holds the surviving spouse’s share of the trust assets
- usually remains revocable, so the surviving spouse can change it
- is fully controlled by the surviving spouse during their lifetime
- is typically included in the surviving spouse’s estate for tax purposes when they later die
Trust B — the bypass trust:
- holds the deceased spouse’s share of the trust assets
- becomes irrevocable on the first death and generally cannot be changed
- may be used to support the surviving spouse during their lifetime, often subject to limits described in the trust document and shaped by tax rules
- is designed so that the assets in it pass outside the surviving spouse’s taxable estate, which is where the original tax-saving rationale came from
How Trust B can be used by the surviving spouse depends on how the trust is drafted and on current tax law, both of which an estate planning attorney can review.
Why Some Married Couples Have Considered an A/B Trust
A/B trusts were historically a common choice for two main reasons:
- to make use of each spouse’s federal estate tax exemption, rather than potentially losing the first spouse’s exemption when assets passed outright to the surviving spouse, and
- to set the terms for how the deceased spouse’s share would be used and where it would ultimately go, which can matter in blended families, second marriages, and families with children from a prior relationship.
The first reason has changed over time. Federal estate tax rules now allow a surviving spouse to use the unused portion of a deceased spouse’s federal estate tax exemption through an election sometimes called portability. The IRS explains the portability election and the deceased spousal unused exclusion in its Frequently Asked Questions on Estate Taxes. Because of that change, fewer couples need a bypass trust solely for federal estate tax reasons. The specific dollar amounts, election deadlines, and procedural requirements change and should be confirmed with current sources before relying on them.
The second reason — controlling where assets ultimately go — still matters to many California families, especially blended families or couples who want to make sure children from a prior marriage eventually inherit the parent’s share regardless of what happens after the first death.
Common Considerations and Tradeoffs
An A/B trust is not the simplest planning structure. Some practical considerations include:
- Trust B becomes irrevocable on the first death, so the surviving spouse has less flexibility than they would with a single joint revocable trust.
- Trust B usually needs its own tax identification number, separate accounting, and ongoing administration.
- The first death triggers real administrative work, and the surviving spouse may want professional help to fund Trust B correctly.
- California community property rules affect how assets are characterized and how they are divided between the two sub-trusts.
- Federal estate tax thresholds, portability rules, and any state tax rules can change. The tax math that supports a particular A/B structure today may look different in a few years, which is why couples often revisit their trust periodically.
A/B Trusts and Other California Trust Structures
An A/B trust is one option among several. Couples may also consider a single joint revocable living trust, separate property trusts that each spouse manages independently, or other planning vehicles, depending on family goals, asset types, and potential estate tax and asset protection concerns. The right choice depends on the family’s situation and on current California and federal law.
How We Help
At VK Law, our California estate planning team helps married couples think through whether an A/B trust fits their goals or whether a different structure may be a better match. We can:
- explain how A/B trusts, revocable living trusts, and other options compare under current California and federal law
- review existing trust documents that already include A/B trust provisions and explain whether updates may make sense
- help with trust administration after the first spouse’s death
- coordinate with tax professionals when planning involves federal estate tax considerations
To talk through whether an A/B trust or another structure may fit your family’s needs, contact our California estate planning team to schedule a consultation.
Frequently asked questions
It can be, depending on the family's goals. Federal estate tax changes mean fewer couples need an A/B trust strictly for tax reasons, but A/B trusts can still help when one spouse wants to control where their share of the assets ultimately goes, such as in blended families. An estate planning attorney can explain whether an A/B trust fits a family's situation under current law.
Generally, no. Once the first spouse dies, Trust B is usually irrevocable. The surviving spouse may have certain rights to use Trust B assets under the trust's terms, but the terms themselves typically cannot be rewritten. The specific document and current law should be reviewed for what is and is not allowed.
An A/B trust is part of a revocable living trust structure. Like other living trusts, it can help families avoid probate for assets properly transferred into the trust. Probate is the court process for administering certain assets after death. Whether probate is avoided in a specific case depends on how the trust is funded and how assets are titled.
The split is usually set by a formula in the trust document, which is influenced by current tax law and by the value of the assets at the first spouse's death. A trust administration attorney can walk the surviving spouse through how the formula applies and what steps are needed to fund each sub-trust.
Many California couples set up A/B trust language years ago. Because federal estate tax rules and family circumstances change, it is reasonable to have an estate planning attorney review the document and explain whether updates make sense for the current law and the family's goals.
