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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 2018, that exempt amount exceeds $11,000.000.00 for single persons and $22,000,000.00 for married persons.

The parties must split their assets so that roughly half the assets are held by each spouse. 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" such as for support, health and welfare 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.

Contact a credit shelter trust attorney in Pembroke Pines.

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