Estate Planning

Credit Shelter Trusts

The Estate Planning lawyers at the Elder & Disability Law Center provide comprehensive estate planning advice and legal services to individuals and families in the Washington, D.C. area, Maryland, and Virginia. Please contact us for a consultation, a credit shelter trust, or any other estate planning option.

If you and your spouse’s gross estate is worth more than $2 million (or $3.5 million in 2009), you may be a candidate for a credit shelter trust, which can be used to minimize your estate taxes. Because spouses can pass an unlimited amount to one another upon death free from estate tax, the U.S. estate tax system looks to the spouse that is second to die.

Although any assets passed to a surviving spouse qualify for the unlimited marital deduction, when the surviving spouse dies all of his/her assets will be taxed before being passed to the beneficiaries, including any assets he/she inherited from his/her spouse. A credit shelter trust enables you to take advantage of your estate tax exemption by placing an amount equal to the exemption ($2 million in 2008 and $3.5 million in 2009) into a trust for the benefit of your spouse. If your $2 million exemption is not used upon your death, it is lost, and those assets will ultimately be taxed when your spouse dies.

Special language must be used in a credit shelter trust so that the assets will not be included in the estate of the beneficiary (i.e. the surviving spouse). Generally the surviving spouse is given only limited powers to control the trust assets. You can set up the credit shelter trust to pay income to your spouse for life, plus any amounts needed for health, education, maintenance and support. Upon your spouse’s death, the assets in the credit shelter trust will pass to your heirs as the beneficiaries of the credit shelter trust.

An experienced Estate Planning attorney will be able to work out the details with you and help you decide if a credit shelter trust is a good choice for you. Contact an Estate Planning lawyer at the Elder & Disability Law Center for a consultation.