May the Surviving Spouse Act as Trustee? Yes, the surviving spouse may serve as trustee of the credit shelter trust. If the spouse serves as the sole trustee he or she must be restricted to using income and principal for needs related to health, education, support and maintenance.
Does a credit shelter trust get a step-up in basis?
First, in a standard credit shelter trust, there is no step-up in basis at the death of the surviving spouse. Second, the credit shelter trust is a separate taxpayer and requires its own tax return, Form 1041.
How does a surviving spouse benefit from a credit shelter trust?
There is an unlimited estate tax deduction for property left to a surviving spouse. This eliminates any estate tax when the first spouse dies, but may not protect the property from estate tax when the surviving spouse dies. How is the Credit Shelter Trust Funded? There are generally two ways to fund the credit shelter trust.
How does a Credit Shelter Trust ( CST ) work?
A credit shelter trust (CST) is a trust created after the death of the first spouse in a married couple. Assets placed in the trust are generally held apart from the estate of the surviving spouse, so they may pass tax-free to the remaining beneficiaries at the death of the surviving spouse.
Which is better, a credit shelter trust or a portability Trust?
Portability is a new concept. It allows the surviving spouse to claim the deceased spouse’s exemption for later use even though the assets pass outright to him or her instead of in a credit shelter trust. Which is Better: A Credit Shelter Trust or Having My Spouse use Portability?
Do you have to pay estate tax on a shelter trust?
If you wish to maximize a trust that will be free of estate tax at a child’s death, the bypass planning is necessary. Inflation: The amount of the “ported” exemption is fixed in the year the first spouse dies. If the deceased spouse’s property appreciates, this portion may be taxed.
