Austin Probate Lawyer

Credit Shelter Trust

The federal estate tax applies when an individual dies owning a very large amount of property. The amount of the estate tax depends on the year of death. From 2006 to 2008, the amount was $2 million and will increase to $3.5 million in 2009. If there is a chance that your estate may owe the tax, it would be a good idea to consider creating a living trust. This will help to both avoid probate and also save on federal estate tax. Not doing so could result in a large estate tax bill when you or your spouse dies.

Credit Shelter Trust

A credit shelter trust, commonly referred to as an AB trust, allows a couple to pass the maximum amount of property to their children or other beneficiaries after both spouses die. It guarantees that the surviving spouse is left financially comfortable during his or her lifetime.

How it Works

Typically, a spouse’s entire estate is left to the surviving spouse. To help avoid the tax, each spouse leaves most or all of his or her property to a credit shelter trust. After the death of one spouse, the surviving spouse can use that property, but does not own it. This is what allows for the big tax savings. Because the second spouse never legally owned the property it is not subject to estate tax.

How it is Done

Each spouse names final beneficiaries who will receive the trust’s property when the surviving spouse dies. Spouses often name the same people, their children, as final beneficiaries. However, this is not mandatory.

If you have questions about the likelihood of your estate being taxed, or would like to set up a credit shelter trust, you need to deal with a law firm that will handle your estate planning with the attention it deserves.

Speak with an Austin Probate Lawyer

Contact the Austin probate lawyers of Slater, Kennon & Pugh LLP at 512.338.1102.