Credit Shelter Trusts (CST) are estate planning tools designed to minimize estate taxes for married couples.
A Credit Shelter Trust allows one spouse to transfer assets into a trust upon their death, utilizing the estate tax exemption available at that time. The assets placed in the trust are not included in the surviving spouse’s estate, effectively sheltering them from estate taxes. This strategy is particularly beneficial when one spouse has a significantly larger estate than the other.
For example, if the estate tax exemption is $11 million, the first spouse can pass $11 million into the Credit Shelter Trust. The surviving spouse can still benefit from the trust, receiving income generated by the assets, but the principal remains outside of their estate, preserving the tax exemption for future generations.
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