Cleveland, Ohio estate planning lawyer, Daniel A. Baron, of Cleveland, Ohio, offers the following information on what a Credit Shelter Trust is and should it be part of your comprehensive estate planning.
If you are married and an investor, for example, consider establishing a Credit Shelter Trust. This can also be referred to as an A-B Trust and is an Irrevocable Trust.
The benefits of a Credit Shelter Trust is, that it allows the assets of the trust (up to a predetermined amount, i.e. $500,000) to transfer to the beneficiaries specified within the trust, typically your children, without any estate taxes being assessed. Also, your spouse continues to have all rights to the assets of the trust and any income generated until the spouse passes away.
If you are a blended family, a Credit Shelter Trust might be the right tool for you as part of your comprehensive estate planning. If at the time of death of the first spouse the assets of the deceased spouse to immediately into the Credit Shelter Trust. If the assets transferred are larger than the predetermined amount (we used $500,000 as the example), the excess assets go into a trust which qualifies for the Marital Deduction. Since the Credit Shelter Trust is irrevocable, it has great estate tax liability advantages as well as making certain your assets are passed along to your beneficiaries, typically your surviving spouse and your children. Establishing a Credit Shelter Trust insures that the worry of the step-parent now getting all the assets, your assets will now be distributed to the beneficiaries as you intended them.
In the event your spouse is still living and would need to dip into the trust’s assets that were set aside for your children, it would be up to your Trustee to assess the necessity of the transfer of funds. The step-parent would not have carte blanche to the funds.
For answers to any questions you may have on a Credit Shelter Trust and making it a part of or your Comprehensive Estate Planning, contact Daniel A. Baron of Baron Law today at 216-573-3723. Let’s work together to see what the best Trust is for your situation.
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