By: Will Hellams
For years, estate tax planning for couples has included the use of credit shelter trusts, also known as bypass or family trusts, to take advantage of the first-to-die spouse’s estate tax exemption. Over the past 15 years, the federal estate tax exemption has increased from $675,000 to $5.4 million in 2015. Maryland and the District of Columbia have passed laws increasing their state estate tax exemption amounts. The increase in federal and state estate tax exemptions has meant estate taxes are no longer a concern for most people.
This presents a potential adverse tax situation for a surviving spouse who is a beneficiary of a credit shelter trust created at the death of the first spouse, and whose assets are below the federal and state tax exemption amounts. At the death of the surviving spouse, the assets remaining in a credit shelter trust will not receive a step-up in basis, but will have a carryover basis equal to the value of the assets at the death of the first spouse.
Read the article in full at, "Gimme Shelter: Income Tax Planning Opportunity for Certain Credit Shelter Trusts."
Will Hellams is an estate planning attorney who regularly works with individuals and families on strategies to reduce transfer taxation, protect and preserve assets, and facilitate the transfer of assets among family members. For more information on credit shelter trusts, contact Will at (301) 841-3843 or jwhellams@lerchearly.com.
This article originally appeared in the Lerch Early Legal Update. To subscribe, visit http://www.lerchearly.com/publications/7.
