All to You vs. AB Trust: What's the Difference?

“Simplicity is complexity resolved." – Constantin Brancusi

All to You vs. AB Trusts: What’s the Difference?

When it comes to estate planning, choosing the right type of trust can make all the difference in ensuring your assets are managed exactly how you intend. Two common options for married couples are the "All to You" Trust (also known as an "I Love You" Trust) and the AB Trust.  While both serve to protect your assets and provide for your spouse, they operate in fundamentally different ways.  Let's break it down. 

What is an All to You Trust?

An "All to You" Trust is exactly what it sounds like—when one spouse passes away, everything in the trust transfers directly to the surviving spouse without restriction.  The surviving spouse can use, manage, and even change the trust as they see fit.  This type of trust is simple, flexible, and ensures that the surviving spouse has complete control over the assets left behind.  For many couples, this structure is appealing because it allows the surviving spouse to make financial decisions freely, including updating beneficiaries, selling property, or using the funds however they need.  However, this flexibility can also be a downside, especially when it comes to ensuring that the wishes of the first spouse to pass are faithfully carried out by the surviving spouse. 

What is an AB Trust?

An AB Trust, on the other hand, is designed to provide for the surviving spouse while also locking in certain protections over the deceased spouse’s portion of the estate.  Here’s how it works.  When the first spouse dies, the trust is split into two parts:  an “A” Trust and a “B” Trust. The “A” Trust (also known as the Survivor’s Trust) holds the surviving spouse’s share of the assets, which the surviving spouse can access and control without limitation.  The “B” Trust (also known as the Decedent’s Trust or Bypass Trust) on the other hand holds the deceased spouse’s share of the assets.  While the “B” Trust can be structured so the surviving spouse has access to income from the “B” Trust (and sometimes principal under certain conditions), the surviving spouse cannot change the beneficiaries of the “B” Trust or alter its terms. 

Historically, the AB Trust was the default template for many estate planners before estate tax exemptions significantly increased.  Today, however, the AB Trust is more commonly used in situations where one or both spouses want to ensure that specific beneficiaries inherit a portion of their estate, regardless of what the surviving spouse decides to do after the passing of the first spouse.

Conclusion – Pros and Cons

Choosing between an All to You Trust and an AB Trust ultimately depends on your priorities.  If you value simplicity and flexibility, an All to You Trust is easy to administer, allows the surviving spouse full control over assets, and enables them to update the trust as circumstances change.  This flexibility, however, may come with risks.  With an All to You Trust, there are no protections against a surviving spouse changing beneficiaries, spending assets in ways the deceased spouse might not have intended, or facing financial complications in the event of remarriage.  An AB Trust, on the other hand, provides strong safeguards to ensure that the deceased spouse’s wishes are carried out, offering protection for specific beneficiaries, such as children from prior marriages.  While an AB Trust is more complex—and often more costly—to administer, it can provide peace of mind for those who want to guarantee a specific inheritance plan after their passing.

At Shaka Law, we help couples navigate these decisions based on their unique family and financial situations.  If you’re considering setting up a trust or simply want to learn more about how it can benefit your estate planning, Shaka Law is here to help.  Schedule a free consultation with us to discuss your specific needs and how we can assist in making your estate planning stress-free and tailored to your circumstances.