What is a Credit Shelter Trust?

Sometimes, credit shelter trusts are referred to as an A-B bypass trust. They are established as a way for you to pass on your estate and to avoid estate taxes.

Do I need a credit shelter trust?

An A-B bypass trusts are suggested if you and your spouse’s estates exceed the exemptible amount allowed for federal or local estate taxes. The federal exemptible estate amount in 2015 rose to $5,430,000. You will have to check locally for your State’s estate tax regulations. Florida residence can rejoice! Florida does not have a “death tax”. Our local friends and family in Boca Raton are not subject to estate or inheritance taxes.Credit Shelter Trust

When a credit shelter trust has been created, each spouse has a document that will establish a trust after the death of the first spouse. On this document, each spouse will name the other spouse as the beneficiary of the trust due to unknowing who will die first.

Many couples may say, we live in Florida, our combined estates will not exceed the federal limit why create a credit shelter trust?

The A-B trust also has other potentially helpful uses. For example, Florida next year could change our inheritance tax laws. Additionally, the Federal estate tax laws could change just as easily. The funds in the trust are protected from creditors. One last thing it also will secure children’s inheritance if a surviving spouse should remarry. Most importantly, it will avoid paperwork headaches when the estate needs to be transferred.

Do you have questions about your estate planning? Do you need assistance figuring out if a credit shelter trust is needed for you and your spouse? Contact us right awa!. We offer free consultations!