One of the most common questions married couples ask when creating an estate plan is: What happens to our living trust when the first spouse dies? The answer depends on how the trust was designed.
In this video, estate planning attorney Justin M. Kennedy explains two common trust structures for married couples: the A Trust (single trust) structure and the AB Trust structure. While both options begin as a joint living trust during the spouses’ lifetimes, they function very differently after the death of the first spouse.
Justin discusses how each trust structure works, when an AB Trust may be beneficial for blended families and second marriages, and how modern estate tax laws have influenced trust planning strategies. He also explains why trust design is one of the most important decisions married couples make when creating a comprehensive estate plan.
Whether you are establishing a living trust, updating an existing trust, or seeking to better understand your estate planning options, this video provides valuable insight into what happens to trust assets after the first spouse’s death and how different trust structures can help accomplish your family’s goals.
Married couples who create a joint living trust have an important decision to make: What happens to the living trust after the first spouse dies?
While both spouses are alive, their assets may remain together in one joint trust. After the first spouse dies, however, the trust can continue in different ways depending on how the estate plan was designed.
Two common approaches are an A-only Trust and an AB Trust. Understanding the difference can help couples consider how much flexibility or protection they want to build into their estate plan.
Option 1: The A-Only Trust
With an A-only Trust, the joint trust generally stays as one trust after the first spouse dies, so it may appeal to couples who do not want to place significant restrictions on the surviving spouse.
The surviving spouse continues to manage the trust and may have the ability to make changes based on the terms of the trust. This can provide flexibility for responding to changes in tax laws, family circumstances, or beneficiaries’ needs.
However, that flexibility also creates a potential concern. Depending on the trust terms, the surviving spouse may be able to change beneficiaries or make other significant changes after the first spouse’s death.
For some couples, especially those with blended families or children from previous relationships, that possibility may not match their estate planning goals.
Option 2: The AB Trust
An AB Trust works differently.
When the first spouse dies, the original joint trust divides into two separate trusts: the A-Trust and the B-Trust.
The A-Trust
The A-Trust generally holds the surviving spouse’s share of the couple’s assets, along with the surviving spouse’s separate property.
Depending on the trust terms, the surviving spouse may continue to control and make changes to the A-Trust.
The B-Trust
The B-Trust generally receives the deceased spouse’s share of the joint assets and the deceased spouse’s separate property.
Unlike the A-Trust, the B-Trust typically becomes irrevocable after the first spouse dies. This means its key terms generally cannot be changed in the same way as a revocable trust.
One simple way to remember the distinction is:
- A-Trust: associated with the Above-ground (surviving) spouse.
- B-Trust: associated with the Below-ground (deceased) spouse.
An AB Trust can be useful when a spouse wants to provide for the surviving spouse while also preserving assets for certain beneficiaries. This can be especially relevant in blended families or later-in-life marriages.
Can the Surviving Spouse Still Use the Assets?
An AB Trust does not necessarily mean that the assets placed in the B-Trust are unavailable to the surviving spouse.
The trust can be written to provide financial support for the surviving spouse during their lifetime, subject to the terms established in the estate plan.
One way to picture the arrangement is as two separate wallets. The surviving spouse may have assets available through both trusts, but each “wallet” follows different rules.
Exactly how and when money can be distributed from the B-Trust depends on the specific trust language.
Why Are There Different Types of AB Trusts?
There are several ways to structure an AB Trust.
Historically, AB and ABC trust structures were often used as part of federal estate tax planning. These strategies were especially important during periods when the federal estate tax exemption was much lower. For example, the federal estate tax exemption was only $1 million for certain years in the early 2000s.
Estate tax laws have changed significantly since then. For individuals who die in 2026, the federal basic estate tax exclusion is $15 million. The IRS provides current information about federal estate and gift tax rules.
Because the tax environment has changed, estate planning attorneys may consider different trust structures and tax strategies based on a family’s assets, goals, and circumstances.
An AB Trust with Greater Flexibility: The Clayton Trust
The Clayton Trust can provide flexibility in utilizing additional tax planning strategies after the first spouse dies. This may allow an estate plan to respond to the tax laws and circumstances that exist at the time of the passing of the first spouse, rather than requiring every tax decision to be made years in advance when the trust is created.
Traditional AB or ABC structures may still be appropriate in some situations. However, newer planning approaches like the Clayton Trust may provide greater flexibility for certain families.
The appropriate structure depends on several factors, including the size and type of the estate, family relationships, tax considerations, and the couple’s long-term wishes.
Choosing What Happens to a Living Trust After the First Spouse Dies
Deciding what happens to a living trust after the first spouse dies involves balancing flexibility with control. Estate planning decisions should be based on your individual circumstances, goals, and applicable law.
There is no single trust structure that is appropriate for every married couple.
An A-only Trust may give the surviving spouse greater freedom to respond to future changes. An AB Trust may provide additional protections when the couple wants to preserve part of the estate for specific beneficiaries.
The attorneys at Litherland, Kennedy & Associates can explain clearly the different choices involved in designing a living trust estate plan. You can also learn more by attending one of the firm’s in-person living trust seminars or viewing an on-demand estate planning presentation.
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