Legally Speaking: Why Older Marital Trusts Deserve Review
Why revisit my Trust Now?
Many couples established Revocable Living Trusts more than a decade ago, at a time when estate tax planning was driven by federal exemption amounts of $600K per person, instead of today’s $15 million. As a result, many of these trusts include a mandatory A/B trust split at the first spouse’s death, requiring the surviving spouse to divide trust assets into two separate trusts. While this structure was once considered prudent and effective, changes in federal tax law mean A/B trusts may create unintended taxes and burdens.In 2026, the federal estate and gift tax exemption is $15 million per person and increases annually for inflation. Arizona couples that were facing an A/B split in the past no longer face any estate tax liability at all. However, if their trust has a mandatory A/B split, they are stuck with a structure that may not meet their needs.
Loss of a “Step-Up in Basis” (Cost Basis)
Example: Consider Bill and Mary, a married couple with three children and $3 million in assets. Bill dies. Their A/B plan leaves $1.5 million under Mary’s full control (A), while $1.5 million go to an irrevocable Trust (B). All $3 million get a full step-up in basis at Bill’s death, eliminating any capital gains taxes Mary might pay if she sells assets that have appreciated over time.
10 years later Mary dies & Trust B does not get a step-up in basis at her death. B assets doubled in value since Bill’s death, and the children liquidate everything. There is no estate tax (the estate is below the $15 million threshold); however, capital gains tax due on Trust B assets is approximately $400K. If Mary had avoided the A/B split, capital gains taxes are zero! The A/B split came at a painful $400K cost!
Loss of Flexibility, Higher Burden
Mandatory A/B splits also suffer from inflexibility. Once assets are locked into Trust B, it is often impossible to bring those assets back into Mary’s estate for better cost-basis planning.The A/B split creates administrative complexity and cost. Separate trusts require ongoing accounting, separate tax returns, legal documentation, and investment management. B Trust assets reach the highest federal income tax bracket (37%) once annual income exceeds roughly $15,000.Example: B Trust generates $50K in annual income, nearly $22K in income tax is owed if not distributed to Mary.
The Split May Still Serve a Purpose
That said, an A/B split can offer important benefits, including protection for blended families, creditor protection, and beneficiary continuity. Also, A/B planning may hedge against future reductions in estate taxes or concerns about portability of tax benefits between spouses.
Flexibility is Key
Your Estate Plan should favor flexibility, and permit the use of an A/B split, when beneficial, while preserving options for families. A periodic review of an older trust can help ensure it continues to serve its intended purpose, while avoiding unnecessary burdens on families, so you can..
..leave a legacy, not a burden.
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