Credit Shelter Trust (CSTs, A/B Trusts or Marital Trusts)

A Credit Shelter Trust can help married couples pass more wealth to their heirs by maximizing estate tax exemptions. While these trusts are less common today due to the high federal estate tax exemption and portability rules, they may still benefit families with significant assets or assets expected to appreciate substantially over time.

How It Works

When the first spouse dies, assets up to their available estate tax exemption are placed in a trust for the benefit of the surviving spouse and other beneficiaries. Because these assets are generally excluded from the surviving spouse's taxable estate, future appreciation may also avoid estate taxes.

Doesn't Portability Do the Same Thing?

Portability allows a surviving spouse to use any unused portion of the deceased spouse's estate tax exemption. For example, if Spouse A dies with $9 million in assets and the exemption is $15 million, the unused $6 million exemption can be transferred to the surviving spouse.

However, portability does not shelter future asset growth from estate taxes. A Credit Shelter Trust can, making it a valuable planning tool for estates that may increase significantly in value.