<p>There are two ways to write a trust. You can put it in your will and  the trust only takes effect after you die. The other way is to create a  living trust and put your property into the trust while you are alive.  Usually the living trust is revocable which means that you can withdraw a  portion or even all of the trust property while both you and your  spouse are alive. The principal difference between a testamentary trust  (trust in a will) and a living trust is that a living trust will avoid  probate expenses and a testamentary trust will not.</p>
<p>Substantial  death tax savings can result from the use of an estate planning trust.  This type of trust is usually called the A-B trust. The A-B trust can be  the testamentary type or a living trust. For example, a husband and  wife have an estate of $10,000,000. They create a trust. In this case  husband and wife are creators, trustees and beneficiaries. During their  lifetimes, the trust is revocable meaning it can be canceled. If the  husband dies, then the trust becomes irrevocable meaning that it cannot  be canceled. The A trust is the wife's one half of the property. The  wife receives all the income from the A trust and can even withdraw  principal if she desires. The B trust (the husband's one half of the  community ) usually provides that the wife receives the income from the  trust but has limited rights to withdraw principal. The wife basically  controls all the property in the A trust including deciding who receives  all the property in the A trust after she dies. However, the B trust is  controlled by the instructions in the trust which was decided by the  husband when he was a live. Usually the trust states that the property  in the B trust passes to the children upon the death of the wife.</p>
<p>Why  are trusts written that way? For tax purposes. If the husband and wife  write their trust as above, then the B trust will not be taxed upon the  surviving wife's death. (See section on community property). If there  had been no trust, when the husband dies, all property would pass to the  wife. Her estate would be $10,000,000. There will be no death tax due  upon the husband's death because of the special estate tax rules.  However, when the wife dies all amounts over $5,000,000 (in 2013) will  be taxed. In this example, $5,000,000 is subject to estate tax. The  approximate tax will be $2,200,000. This is a substantial sum of money.</p>
<p>However,  with an A-B trust, there will be no tax due. That is a savings of about  $2,200,000. Also if the creators made a living trust they will save  probate expenses which would be about $300,000 or more. Therefore, the  creation of an estate planning trust could save the husband and wife  $2,500,000. This means that $2,500,000 will pass to their children which  otherwise would have been paid to the Internal Revenue Service and for  probate fees.</p>
<p>There are some disadvantages of a trust. After the death of the first spouse, the trust will require separate tax returns.</p>
<p>There  will be maintenance costs of the trust including accounting fees, legal  fees, and administration fees. However, considering the substantial tax  savings, the overall benefit of a trust greatly outweighs the minor  disadvantages.</p>