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Credit Shelter Trust

A credit shelter trust is a type of trust that is used by married couples with large estates in order to avoid federal estate taxes upon the death of the first spouse. This type of trust is structured so that, upon the death of the first spouse, the maximum amount of property sheltered from the federal estate tax ($5,340,000 for 2014) is transferred to this trust. The trust is designed so that the assets in this trust will not be subject to the federal estate tax in the surviving spouse’s estate upon his/her subsequent death. As a result, the assets placed in this trust upon the death of the first spouse will not be subject to federal estate taxes in either spouse’s estate, and will be transferred to other beneficiaries free of any estate taxes.

Even though the assets in a credit shelter trust will not be taxed in the estate of the surviving spouse, the trust is designed in such a way that the surviving spouse can enjoy the benefits of the assets placed in this trust. The income from the trust can be distributed to anyone the grantor chooses, including spouse, children or both. The grantor can also provide in the trust that the principal is to be distributed subject to an ascertainable standard (such as health, support, maintenance and education), or it could provide that principal distributions are at the trustee’s sole discretion.

Call The Law Office of Mary Beth Kelly, LLC in Lake Mary at 407-536-6901 or send an email to discuss the potential tax benefits of trust-based planning today.