Can the Credit Shelter Trust Help Idaho Tax Payers?

MB900405342[1]Even amongst recent tax lawchanges, there are certain estate planning tools that are still good ole’standbys for your estate plan.  You justhave to make sure those sparkly tax law changes don’t blind you from seeingthat old tools, like the credit sheltertrust, can still work.

Before the advent of portability as a method to maximize thefull estate tax exemption available to married couples, such couples wouldoftentimes get caught in a maritaldeduction trap. In other words, the first spouse to die could pass alltheir wealth to the surviving spouse without triggering estate taxes, but uponthe death of the surviving spouse only one spousal exemption (i.e., that of thesurviving spouse) would be available to reduce estate taxes on the couplescombined estate. Under the right circumstances, this was a recipe for disaster.

Enter the credit shelter trust, also known as a bypass trust, which was a wayof avoiding that marital deduction trap. Nevertheless, recent changes to thefederal estate tax laws now allow a decedent spouse to pass their assets andtheir estate tax exemption to their surviving spouse. This portability of the estate tax exemption can now give a marriedcouple the power to shelter as much as $10.5 million tax-free.

So, no need for those creditshelter trusts? Not so fast! As addressed in a recent post in Elder Law Answers titled simply “Credit Shelter Trusts,” there isstill plenty of life left in the this tried-and-true estate tax planningapproach.

For starters, many states stillhave their own independent estate taxes at much lower levels than the $5.25million level exempted per spouse under the federal estate tax exemption. Moreimportantly, portability does notapply to such taxes. In addition, credit shelter trusts not only shelter assetsfrom estate taxes, but they can protect an inheritance from the unsuccessfulremarriage of the surviving spouse and general inheritance protection.

While there are myriad trust arrangements available tohelp you achieve your specific estate planning goals, the basic credit sheltertrust is a proven tool that should be considered in the estate planning ofevery married couple.

For more information on this subject,contact IdahoEstate Planning and schedule aconsultation. Remember,good planning is no accident.


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