CREDIT SHELTER TRUST Meaning and
Definition
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A credit shelter trust, also known as a bypass trust or a family trust, is a legal arrangement that helps individuals minimize estate taxes upon their death. It is a trust established by a married couple to take advantage of the estate tax exemption limits.
When one spouse passes away, their assets are transferred into the credit shelter trust, up to the amount of the current estate tax exemption. This effectively shelters the assets from being subject to estate taxes. The surviving spouse can then use and benefit from the trust's income and assets during their lifetime, while also preserving the exemption amount for their own estate.
The credit shelter trust is irrevocable, meaning that once it is created, it cannot be altered or revoked by the surviving spouse. Upon the death of the surviving spouse, the assets in the trust are transferred to the beneficiaries as specified in the trust documentation, typically the couple's children or other family members.
The purpose of a credit shelter trust is to maximize the use of estate tax exemptions and prevent any unnecessary taxation on the beneficiaries' inheritance. It provides a way for individuals to transfer assets to their heirs while minimizing the impact of estate tax. This trust structure is often employed by married couples who have significant assets and want to ensure their legacy is preserved for future generations.
Common Misspellings for CREDIT SHELTER TRUST
- xredit shelter trust
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- cresit shelter trust
- crexit shelter trust
- crecit shelter trust
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