Trust B tax amount

Kind of an oxymoron here. You have to decide whether you want current income or long term appreciation of the assets. Perhaps investing in a more "balanced" set of funds is what you are after.

Trust A, as you have described it, is the property of your mother and the assets in that trust will be adjusted (stepped up or down) to FMV upon her death. Combined with her other estate assets, they will be subject to the lifetime estate exclusion in force at that time. If death occurs in 2010, the exemption is unlimited. Distribution of these assets will be as directed by the trust and/or will provisions. Trust B, which is often called the "family trust", is NOT part of her estate. She may have the right to income produced by the trust during her lifetime, but the children (usually) are the ultimate beneficiaries. Assets will be valued at their purchase price or value when placed in the trust, and will not receive any step up in cost basis upon mother's death. There is no estate exemption - that was used when the trust was created.

The survivor's trust continues to be counted among the survivor's property. Any use of the lifetime exemption for the survivor is unrelated to its use for the spouse who died first. In other words, when your mother dies her exemption amount will be whatever the law says it is at that time (scheduled to be $1,000,000 after 2010). Whatever is in her trust will be included in her taxable estate. The fact that some or all of her assets are in a trust are irrelevant. Stu

thanks everyone.