What type of will addresses estate tax issues and creates two trusts, known as the A trust and the B trust?

• A. Bypass trust
• B. Power of appointment
• C. A/B will
• D. QTIP trust

Answer: (C)

This type of will is a planning tool that addresses estate tax by splitting the first deceased spouse’s estate into two separate trusts, creating the A trust and the B trust.

The A trust, often called the marital trust, is funded to provide for the surviving spouse and qualifies for the unlimited marital deduction, allowing assets to be used for the spouse during life without immediate estate tax. The B trust, typically the bypass or credit shelter trust, is funded with assets up to the first deceased spouse’s unused estate tax exemption. It “bypasses” the surviving spouse’s estate for tax purposes, preserving that portion of the exemption for heirs when the second spouse dies.

Together, these two trusts optimize estate tax planning: the surviving spouse has access to income and needs, while the heirs can benefit from the remaining exemption at the second death. Other options describe different tools (a standalone bypass concept, a QTIP that’s another form of marital trust, or a power of appointment), but they don’t create this specific two-trust structure within a will.