The
Problem
While an estate left
to a spouse initially incurs no federal estate tax because of the
"unlimited marital deduction"
allowed by current law, this same estate is subject to heavy
tax at the death of the
second spouse.
The
Solution
Through a technique called
an "A/B Marital Deduction / Credit Shelter Trust", the tax
liability on the estate
can be dramatically reduced.
Here's
How It Works
Current tax law allows
every person a credit of $192,800, which effectively allows the
transfer of $600,000
of property free to federal estate tax. when a couple has an "All To
Spouse" will, this credit
is never used because everything goes to the surviving spouse
tax-free.
Using an "A/B
Marital Deduction/Credit Shelter Trust Plan," this problem is corrected.
Here's how: At the death
of the first spouse, the estate is split into two parts. One portion
($600,000) goes into
a Credit Shelter Trust. The other goes to the surviving spouse. This
shelters the $600,000
and its growth from estate taxes and, at the death of the second
spouse, only the remaining
portion of the estate is subject to taxes.