Credit Shelter Trust
Married couples who pass the entire estate outright to their surviving spouse, do not make use of their own applicable credit amount. When the surviving spouse later dies, any amount in excess of $1,500,000 (for 2004 and 2005) will be subject to federal estate taxes. This amount increases gradually until it reaches $3,500,000 in the year 2009. There is no Federal Estate Tax for persons dying in 2010, and then the credit amount reverts to $1,000,000 (unless there is further legislation).

An A-B Credit Shelter Trust can make certain that the unified credit of each spouse is used.


Possible Savings with an A-B Credit Shelter Trust
(Assumes first spouse dies in 2004, and the surviving spouse dies 10 years later)

 
ALL TO
SPOUSE
TAX PLANNING
WITH AN A-B TRUST
Estate at Death of First Spouse [Current Estate Size]
Estate at Death of Second Spouse [Assumes 6% Growth/ 10 years]
Total Tax with "All to Spouse" type of will
Total Tax with a Credit Shelter-Type Trust
Approximate Savings with A Credit Shelter Type Trust
$    700,000
800,000
1,000,000
1,500,000
2,000,000
3,000,000
5,000,000
$ 1,253,593
1,432,678
1,790,848
2,686,272
3,581,695
5,372,543
8,954,238
$    0
0
130,881
568,724
1,054,932
2,039,899
4,009,831
$              0
0
0
0
130,881
568,724
2,532,382
$               0
0
130,881
568,724
924,051
1,471,175
1,477,449


Note 1: Estate tax savings remain constant in larger estates, unless you consider the potential growth of the estate assets between deaths, which would also avoid taxation.
Note 2: Chart above assumes 6% annual growth for 10 years.

 

Every attempt is made to keep information on this and related sites current and accurate. However, you should always consult your advisor before taking action based on information you get from this site or any other source. There may be other factors or options that would apply to your specific situation that are not covered in the brief introductory information presented here.
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