When married couples plan for the future, it’s not just about assets and money. It’s about providing for one another, protecting loved ones, and ensuring that financial plans live on long after they are gone. That is when having AB trusts explained by a professional makes all the difference in creating a plan that preserves assets and provides long-term security for the ones we care about most.
Robbins Estate Law is an Austin-based estate law firm that focuses exclusively on estate planning, probate, and estate litigation. Founded in 2017, the firm has grown into one of the largest estate law teams in Austin, Cedar Park, and Round Rock. We offer predictable, flat fees, clear timelines, and practical guidance so that clients can make informed decisions with confidence.
What Is an AB Trust?
A trust is a legal arrangement in which assets are held and managed by a trust, rather than being owned directly by an individual. The trustee manages the trust-owned assets for the benefit of the named beneficiaries in accordance with written instructions, known as the trust terms.
In an AB trust, a married couple creates a joint trust with trust terms that divide it into two separate trusts, an A trust and a B trust, after the death of the first spouse. After the second spouse dies, the trust distributes remaining assets directly to named beneficiaries. The structure allows spouses to minimize their federal estate taxes while setting clear rules for how assets move and who controls them.
What Are Trust Terms?
A trust operates according to the trust terms, which are the legally binding rules detailed in the trust document. The trust terms outline to everyone involved exactly how the trust operates. In practical terms, these terms answer questions such as:
- Who controls the trust and makes decisions?
- Who benefits from the trust and in what order?
- When and how can the trustee distribute money or property? and
- What happens to trust assets after each spouse’s death?
Once a trust becomes irrevocable, you typically cannot change a trust’s terms.
Terms in an AB Trust
An AB trust contains one set of trust terms while both spouses are alive, then relies on additional terms that apply after the first spouse’s death. The trust document does not create vague instructions. It spells out, in advance, exactly how the trust must be divided and operated.
In an AB trust, the trust terms typically address:
- How the trust divides into two trusts at the first death,
- How assets are valued and allocated between the A trust and the B trust,
- Which terms apply to the surviving spouse, and
- Which terms apply to property that the first spouse to die owned.
These provisions prevent uncertainty and reduce the risk of disputes after the first spouse dies.
How Do AB Trusts Work? AB Trusts Explained
An AB trust usually functions as a joint revocable living trust. That the trust is revocable means the couple can change it or revoke the trust funds at any time. While both spouses are alive:
- The trust operates as one combined structure;
- The couple buys, sells, and retitles assets freely; and
- They retain full control over the trust.
When the first spouse dies, the AB trust divides into two separate trusts, each with its own set of trust terms. That division maintains the terms that the deceased spouse wanted, while allowing the surviving spouse to continue using and benefiting from the assets in each trust.
What Is the A Trust?
The A trust, or survivor’s trust, takes ownership of the surviving spouse’s share of the joint AB trust assets after the split. Common A trust terms include:
- Naming the surviving spouse as trustee and primary beneficiary;
- Allowing the surviving spouse to use, sell, or gift trust assets; and
- Permitting the surviving spouse to change beneficiaries or distribution plans.
These terms ensure that the surviving spouse can continue managing assets in the A trust while they are living, allowing them to retain flexibility.
The A trust usually remains revocable and gives the surviving spouse broad authority. Because the surviving spouse retains control, federal tax law generally includes A trust assets in the surviving spouse’s taxable estate at death.
What Is the B Trust?
The B trust, often referred to as a bypass trust or credit shelter trust, takes ownership of the deceased spouse’s share of the assets. The B trust is typically irrevocable, meaning the surviving spouse cannot modify the trust terms or withdraw property from the trust freely.
Typical B trust terms address:
- Who serves as trustee, and whether a co-trustee or successor trustee is required;
- When and for what purposes the surviving spouse may receive distributions; and
- Who receives the remaining assets after the surviving spouse’s death.
The surviving spouse does not own B trust assets outright. Yet, the trust frequently pays trust income to the surviving spouse and allows the trustee to distribute a limited amount of trust principal for health, support, or maintenance.
Estate Tax Considerations for AB Trusts in Texas
Texas does not impose a state estate tax; however, federal estate taxes may still apply to large estates. The federal estate tax exemption allows you to transfer a certain amount at death without triggering estate tax. AB trusts have historically helped couples use both spouses’ exemptions.
Current law also allows portability, which lets a surviving spouse use a deceased spouse’s unused exemption. Portability simplifies planning, but it does not provide the same asset control features as an AB trust.
Speak with Robbins Estate Law About AB Trust Planning
Choosing the right trust structure depends on your goals related to clarity, protection, and peace of mind. Robbins Estate Law helps individuals and families across Austin, Cedar Park, and Round Rock understand how estate planning tools work in real life.
With a team dedicated exclusively to estate planning and probate, Robbins Estate Law offers clear guidance, predictable flat fees, and planning tailored to your goals. To explore whether an AB trust fits your situation, contact Robbins Estate Law today.