What Is 3D Printing?

Three-dimensional (3D) printing is an additive manufacturing process that creates a physical object from a digital design. The process works by laying down thin layers of material in the form of liquid or powdered plastic, metal or cement, and then fusing the layers together.

Understanding 3D Printing

Since it was introduced, 3D printing technology has already increased manufacturing productivity. In the long-term, it has the potential to massively disrupt both the manufacturing, logistics, and inventory management industries, especially if it can be successfully incorporated into mass production processes.

Currently, 3D printing speeds are too slow to be used in mass production. However, the technology has been used to reduce the lead time in the development of prototypes of parts and devices, and the tooling needed to make them. This is hugely beneficial to small-scale manufacturers because it reduces their costs and the time to market, that is, the amount of time from a product being conceived until its being available for sale.

3D printing can create intricate and complex shapes using less material than subtractive manufacturing processes, such as drilling, welding, injection molding, and other processes. Making prototypes faster, easier, and cheaper allows for more innovation, experimentation, and product-based startups.

Industrial Uses

Car and aircraft manufacturers have taken the lead in 3D manufacturing, using the technology to transform unibody and fuselage design and production, and powertrain design and production. Boeing is using 3D-printed titanium parts in the construction of its 787 Dreamliner airliner. In 2017, General Electric created a helicopter engine with 16 parts instead of 900–an indication of how big an impact 3D printing could potentially have on supply chains.

In medical sciences, 3D printing is being used to customize implants. In the future, organs and body parts may be created using 3D printing techniques. In the fashion world, Nike, Adidas, and New Balance are using 3D printing to create their shoes. In the construction industry, companies around the world are making breakthroughs in 3D printing of the materials need to build homes. Using layers of concrete, homes can be built in 24 hours, which are stronger than regular cinder blocks and cost a fraction of the price.

In the manufacturing of hearing aids, 3D printing is now customary. The use of 3D printing accelerates the process of manufacturing and enables manufacturers to make custom hearing aids. Audiologists can use 3D scanners to create a custom prototype using reference points from the scan. Manufacturers can feed the scan into a 3D printing machine and after fine-tuning the materials and the ear shapes, print the entire hearing aids.

What Is an A-B Trust?

An A-B trust is a joint trust created by a married couple for the purpose of minimizing estate taxes. It is formed with each spouse placing assets in the trust and naming as the final beneficiary any suitable person except the other spouse. The trust gets its name from the fact that it splits into two separate entities when one spouse dies. Trust A is the survivor’s trust and trust B is the decedent’s trust.

Understanding an A-B Trust

Estate taxes can bite deeply into a deceased person’s assets. For example, consider a married couple that has an estate worth $20 million by the time one of the spouses dies. The surviving spouse is left with the whole $20 million, which is not taxed due to the unlimited marital deduction for assets flowing from a deceased spouse to a surviving spouse.

But then, the other spouse dies, leaving the money to their children. The taxable portion of the estate (the amount that exceeds the 2022 exemption threshold of $12.06 million will be $7.94 million). This means that $7.94 million will be taxed at 40%, leaving only $4.76 million for the beneficiaries. The exemption for 2023 is $12.92 million.

To circumvent the estate from being subject to such steep taxes, many married couples set up a trust under their last will and testaments called an A-B trust. In the example above, if the couple instead had an A-B trust, the death of the first spouse would not trigger any estate taxes as a result of the lifetime exclusion; however, a sum of money equal to the current exemption amount will be transferred into an irrevocable trust called the bypass trust or B trust.

This trust is also known as the decedent’s trust. The remaining amount, $7.94 million, will be transferred to a survivor’s trust, or A trust, which the surviving spouse will have complete control over. The estate tax on the A trust is deferred until after the death of the surviving spouse.

Benefits of an A-B Trust

The A trust contains the surviving spouse’s property interests, but they have limited control over the assets in the deceased spouse’s trust; however, this limited control over the B trust will still enable the surviving spouse to live in the couple’s house and draw income from the trust, provided these terms are stipulated in the trust.

While the surviving spouse can access the bypass trust, if necessary, the assets in this trust will bypass their taxable estate after they die. After the surviving spouse dies, only the assets in the A trust are subject to estate taxes. If the estate tax exemption for this spouse is also $12.06 million for 2022 (the exemption threshold for 2023 is $12.92 million) and the value of assets in the survivor’s trust is still valued at $7.94 million, none of it will be subject to estate tax.

The federal tax exemption is transferable between married couples through a designation referred to as the portability of the estate tax exemption. If one spouse dies, the unused portion of their estate tax exemption can be transferred and added to the estate tax exemption of the surviving spouse. Upon the death of the surviving spouse, the property in the decedent’s trust passes tax-free to the beneficiaries named in this trust.

This is because the B trust uses up the estate tax exemption of the spouse that died first, hence, any funds left in the decedent’s trust will be passed tax-free. As the decedent’s trust is not considered part of the surviving spouse’s estate for purposes of the estate tax, double taxation is avoided.

Net Worth and A-B Trusts

If the deceased spouse’s estate falls under the amount of their tax exemption, then it may not be necessary to establish a survivor’s trust. The unused portion of the late spouse’s federal tax exemption can be transferred to the surviving spouse’s tax exemption by filling out IRS Form 706.

While A-B trusts are a great way to minimize estate taxes, they are not used much today. They were popular in the decades around the turn of the 21st century when the estate tax—which hadn’t been adjusted for years—could be triggered on estates as small as $1 million or $2 million. Nowadays, each individual has a combined lifetime federal gift tax and estate tax exemption of $12.06 million in 2022, rising to $12.92 million in 2023.

So only people with estates valued over $12.06 million will opt for an A-B trust in 2022. With the portability provision, a surviving spouse can include the tax exemption of their late spouse, allowing up to $24.12 million as of 2022 and $25.84 million in 2023, which can be transferred tax-free to beneficiaries.