Assisting Florida Couples Develope a Credit Shelter Trust

Estate Planning TermsCredit shelter trusts are designed for married couples. In the event that one spouse passes before the other, these trusts help shelter the estate from excess taxes. Already a specific amount of the estate is exempt from taxation by the federal government. As of right now, the current exemption for 2016 was $5.45 million. Therefore, a husband and wife would not have any estate tax due if their estate valued under $10.9 million.

Also, if one spouse’s half is less than the threshold, the remainder will roll over to the surviving spouse. However, if one spouse passes away and leaves the entire estate to the surviving spouse, the amount of the estate may value at over $5.45 million, and anything over the threshold for the couple’s estate will then be applicable to federal estate tax.

Therefore, a couple who does not properly plan may leave loved ones to face a heavy tax burden. The way to shelter family members and surviving spouses from this occurrence is by creating a credit shelter trust (CST) or an A/B trust.

What is the Credit Shelter Trust?

A credit shelter trust allows the married investor to avoid any federal estate taxes when he or she passes on the estate to heirs. The trust is structured so that, upon the testator’s death, the assets within that trust are transferred directly to beneficiaries who are named in the trust (usually children). One of the key benefits to the CST is that the surviving spouse will still keep his or her rights to managing the assets within the trust, as well as the income the trust generates during his or her lifetime.

Using the Credit Shelter Trust

The surviving spouse may access assets within the CST as well to cover expenses. For example, a spouse who has excessive healthcare costs may be able to tap into those principal assets held within the trust. When the surviving spouse passes, the assets are still transferred to the beneficiaries per the trust agreement and no estate tax will be levied.

Are A/B Trusts Legal in Florida?

Not all states allow the use of CSTs or A/B trusts. The state of Florida, however, does. As long as it is properly drafted by an estate planning attorney, a CST could be a valuable protection tool against estate tax. Again, it only applies to those with a sizeable value in their estate that would be subject to federal estate tax limits in the first place.

The biggest benefit to the A/B trust is that the shelter trust A could still generate a sizeable income for the surviving spouse and provide for them for the rest of their life. Any growth within that trust would also be tax-free.

Explore Your Credit Shelter Options and More, Speak to an Estate Planning Attorney

If you have a larger estate and need to protect loved ones from federal and state estate taxes, contact the attorneys at Beller & Bustamante, P.L. to explore your options. Our attorneys are here to help you protect your loved ones long after you’re gone. Let’s discuss your trust options today by scheduling a consultation at 904-288-4414 or request more information online.