CFP Estate Planning Practice Test 2026 – Comprehensive Exam Prep

In a standard AB trust arrangement, the current exclusion amount for the participating spouse is placed in the B trust, with any excess transferred to the A trust. This approach is designed to optimize estate tax benefits and ensure the proper allocation of assets following the death of the first spouse.

The B trust, often referred to as the bypass trust, receives the exclusion amount to take advantage of the estate tax exemption. By placing this amount in the B trust, the assets held within remain outside of the survivor’s estate, thereby avoiding additional estate taxes when the surviving spouse passes away.

Any remaining assets, which exceed the exclusion amount, are retained in the A trust. This arrangement provides flexibility and ensures that the surviving spouse can still benefit from the assets in the A trust, while the wealth intended to be exempt from taxes is safely situated in the B trust. This strategy is particularly useful in preserving the wealth of the family while minimizing tax liabilities and providing for the surviving spouse’s needs.