The phrase "credit shelter trust" trust refers to a trust that is designed to make maximum use of the unified credit for estate taxes -- which is also known as the lifetime exemption. Each individual is allowed a once-in-a-lifetime exemption from estate and gift taxes. However, the exemption is computed as a credit against the estate and gift tax that is sufficient to offset the tax on an estate of a specified size. 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 2009 the exempt amount is 3.5 million. By the year 2010 the inheritance tax is eliminated but if congress does not make the elimination permanent in the following year the tax will return and the exempt amount will be $1.0 million. Since it is any one's guess what congress will do, planning to maximize the credit is still the smartest estate plan for married couples to utilize.
The parties must split there assets so that roughly 1/2 half of the assets are held by Spouse One and 1/2 of the assets are held by Spouse Two. 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" established in accordance with IRS law for the trustee to distribute principal to the surviving spouse.
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.
The Collin Married Person's Will for the State of Texas with Children With a Credit Shelter Trust for Spouse and a Trust for Children — Marital Trust is a comprehensive estate planning document designed specifically for married individuals in Texas who have children. This will allows for the creation of two important trust structures — the Credit Shelter Trust for the spouse and the Trust for Children, also known as the Marital Trust. The primary purpose of the Credit Shelter Trust is to maximize the use of each spouse's estate tax exemption, thereby minimizing potential estate tax liability upon the death of the second spouse. By utilizing this trust, a certain portion of the deceased spouse's estate is transferred to the trust, taking full advantage of the estate tax exemption. This not only helps protect the assets within the trust from estate taxes but also ensures that the remaining assets pass to the children upon the death of the surviving spouse. The Marital Trust, on the other hand, is created for the benefit of the surviving spouse. It provides income and, under certain circumstances, principal to the surviving spouse during their lifetime. This trust ensures that the surviving spouse has access to necessary funds while preserving the remaining assets for the ultimate benefit of the children. There are no specific alternative types of the Collin Married Person's Will for the State of Texas with Children With a Credit Shelter Trust for Spouse and a Trust for Children — Marital Trust. However, variations can be made within the trust provisions to customize the distribution of assets, specify certain conditions, or address individual preferences. In conclusion, the Collin Married Person's Will for the State of Texas with Children With a Credit Shelter Trust for Spouse and a Trust for Children — Marital Trust provides married individuals in Texas with a comprehensive estate planning solution. This will ensure the protection of assets, maximize tax efficiency, and secure the financial well-being of both the surviving spouse and children.
Para su conveniencia, debajo del texto en español le brindamos la versión completa de este formulario en inglés. For your convenience, the complete English version of this form is attached below the Spanish version.
