Credit Shelter Trust

A credit shelter trust is designed to make maximum use of the unified credit for estate taxes. Each individual is allowed a once-in-a-lifetime credit from estate and gift taxes. For 2008, that exempt amount is $2.0 million. For 2009 the exempt amount is 3.5 million. By the year 2010 the inheritance tax` is eliminated but if congress does not make the elimination permanent in the following year the tax will return and the exempt amount will be $1.0 million. Since it is any one's guess what congress will do, planning to maximize the credit is still the smartest estate plan for married couples to utilize.

The planning sounds complex but it is in reality simple. The parties must split there assets so that roughly ½ half the assets are held by spouse 1 and ½ the assets are held by spouse 2. Each spouse then provides by will or living trust that upon their death the amount of their assets up to the exemption amount are to be held in a trust known as the credit shelter trust. The trust typically provides that the surviving spouse has entitlement to the income and to the principal provided that there are "ascertainable standards" established in accordance with IRS law for the trustee to distribute principal to the surviving spouse. The surviving spouse can even be a trustee.

When the first spouse dies the credit shelter trust is exempt from tax. When the surviving spouse dies the surviving spouse's estate up to the exempt amount is also exempt from tax. This way the parties can exempt twice as much of their combined estates from taxation and save their loved ones substantial tax savings without losing beneficial use and enjoyment of their assets during their lifetimes. Mr. Friedman has been drafting trusts for almost 30 years and he is committed to drafting your trust so that it is not just state of the art, and legally compliant but understandable to the non lawyer. Please contact Mr. Friedman online or call us at 954-385-7282 to set up a free initial consultation.

At the law office of Steven Friedman our guiding principal has and always will be to provide our clients with competent legal representation at a fair and reasonable fee.