There are no intervivos trusts in effect. Also, neither individual's will makes reference to a testamentary trust.
Comments
Clearly, this couple is not being best served with a simple will. An "I love you" will makes sense in smaller estates, but when the individual's estate value exceeds the federal estate tax credit exclusion equivalent, something more complex is called for.
An A-B trust is one solution. The credit trust (sometimes called a residuary by-pass trust, or a "B" trust in a marital A-B trust plan) is a common means of taking advantage of the grantor's exclusion equivalent amount at the grantor's death. Instead of using the unlimited marital deduction, the grantor transfers property equal to the exclusion equivalent amount to the credit trust and then transfers remaining assets to the surviving spouse. Doing so takes advantage of the estate tax credit at the first spouse's death and ultimately reduces the value of estate property at the surviving spouse's death.
The spouse must not have any incidents of ownership with the credit trust property. Because the surviving spouse possesses no general power of appointment over this trust, this strategy ultimately reduces the assets subject to estate taxation at the surviving spouse's death.
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