The Credit Shelter Trust

IRS code § 2010 provides for a unified credit against estate taxes. For 2002, $1,000,000 is the “credit shelter amount” for each individual. The typical estate plan for a married couple who have a sufficiently large estate to cause concern about estate taxes on the first spouse’s death, will provide for transferring the “credit shelter amount” to a bypass trust on the death of the first spouse to die. The balance of the estate is transferred in a manner qualifying for the marital deduction, either outright or in trust.

The primary purpose of the credit shelter trust is to make the property transferred to the trust available to satisfy the needs of the surviving spouse under terms and conditions that will result in any remaining trust property not being included in the survivor’s estate for federal estate tax purposes.