FAQS: What Is A Credit Shelter Trust?

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FAQS: What Is A Credit Shelter Trust?

Do you have assets that you want to leave to your children – but don’t want to incur estate taxes and probate costs? A Credit Shelter Trust can help married couples with significant assets pass their estates after their deaths to children or other beneficiaries without incurring estate taxes, A Credit Shelter Trusts (CST), also called AB trusts, bypass trusts, exemption or family trusts, are revocable trusts that can be customized for your specific situation to protect your spouse from Illinois estate taxes.

Credit Shelter Trusts aren’t just for the wealthy: they can protect families with average assets from burdensome federal estate taxes.

Benefits of a credit shelter trust include:

• reduce federal estate taxes

• avoid probate

• shield assets from creditors

• ensure the wishes of a deceased spouse are carried out

How Does a Credit Shelter Trust Work?

A CST is created when an individual in a married couple dies and there is a surviving spouse. The assets in the CST benefit the surviving spouse during their lifetime. The assets in a Credit Shelter trust can be any form of property including cash, stocks, bonds, real estate and collectibles.

Estate Tax Exemption

Illinois residents are subject to federal estate taxes. If the assets in an Illinoisan’s estate exceed the federal estate tax $11.58 million exemption, an estate is taxed at up to 40%. The beneficiaries do not pay the federal estate tax, that is paid by the estate before funds are distributed to the deceased’s heirs.

The current estate tax exemption is currently scheduled to expire in 2025.

DuPage County Trusts Attorney

Creating a credit shelter trust is an essential part of many estate plans. By working with an attorney, you could draft a trust document that fits your goals now and in the future. If you think that a Credit Shelter Trust is right for you, contact one of our trusts and estates lawyers today and schedule an appointment at 630-864-5835. 

AREAS WE SERVE: Cook, Dupage, Kane, Lake, and Will counties