Janet & Dan just prepared a Credit Shelter Trust Tax Return for the surviving spouse, Stella, of our deceased client, John (her husband). The creation of this Credit Shelter Trust was through John’s estate plan via his will. I am Lynn Spencer from Killingsworth Spencer CPAs with another important tax tip – the importance of Credit Shelter Trusts.

A Credit Shelter Trust is sometimes referred to as a By-Pass Trust because it is set aside to make use of the estate tax exemption available to a decedent and bypasses being included in the surviving spouse’s estate. The surviving spouse and/or others can receive income from the assets in the Trust and generally can receive some Principal for health, education, maintenance, and support – HEMS for short. There is a step-up in basis on the assets placed in the CST when the first spouse dies. The most significant advantage may be that the assets remaining in the Trust, when the surviving spouse passes away, transfer to the beneficiary’s (set up by the decedent) tax-free. A Trust Tax Return must be filed annually by the Trustee as long as the surviving spouse, “Stella,” is alive. 

Credit Shelter Trusts are just one of many estate tax planning tools. If you have a substantial estate and want to learn more about Trusts or their taxation, Please email us (killingsworthspencerllc@newtoatlanta.com), call 404-369-0088, or fill out our inquiry form online for more information. 

A taxpayer was conversing with an IRS agent who said, “As a privilege to live and work in the USA, you have an obligation to pay taxes with a smile.” “Thank God,” replied the taxpayer. “I thought you were going to request cash.”