What is a Credit Shelter Trust? - Seth Schlessel

From Schlessel Law PLLC - In this episode, we break down the important insights from the article ‘What is a Credit Shelter Trust?’ and explore how this strategic estate planning tool can benefit married couples looking to minimize estate taxes and preserve their wealth for future generations. Also known as a bypass or family trust, a credit shelter trust allows couples to take full advantage of their estate tax exemptions, ensuring that a significant portion of their assets remains tax-free. This is especially important in New York, where state estate taxes can impose additional burdens on your estate. With guidance from a Nassau County trust attorney, incorporating a credit shelter trust can help you achieve your long-term financial goals and safeguard your family's future.

The episode takes a closer look at how credit shelter trusts function under New York State trust law. We explain how this type of trust leverages both federal and New York estate tax exemptions to provide maximum tax savings. Currently, the federal estate tax exemption is set at $13.61 million per individual, while New York's exemption is $6.94 million. By using a credit shelter trust, assets up to these exemption limits can be transferred to the trust upon the death of the first spouse, ensuring that they are not subject to estate taxes in the surviving spouse’s estate. However, because New York does not allow for the portability of unused exemptions between spouses, it becomes crucial to plan accordingly, especially with the help of an experienced trust attorney.

We also walk through the mechanics of how a credit shelter trust operates. Upon the death of the first spouse, assets up to the estate tax exemption limit are transferred into the trust, which is managed by a trustee. The surviving spouse can benefit from the trust’s income and certain principal distributions, without owning the assets directly—thereby protecting them from estate taxes. When the surviving spouse passes, the remaining trust assets are distributed to the final beneficiaries, such as children, free of any estate tax obligations. This structure not only ensures tax savings but also provides long-term control over how and when assets are distributed, offering added protection for heirs.

For Nassau County families, setting up a credit shelter trust with the assistance of Schlessel Law PLLC is an effective way to reduce estate taxes and protect assets for future generations. By understanding the intricacies of New York estate tax law and the benefits of a credit shelter trust, you can create an estate plan that meets your family’s needs and ensures that your wealth is passed on as intended. Tune in to this episode for a deeper dive into how credit shelter trusts work and why they are a critical part of a comprehensive estate plan. Contact Schlessel Law PLLC today to learn more about how a Nassau County trust attorney can help you create a credit shelter trust tailored to your estate planning goals.

Schlessel Law PLLC

34 Willis Ave Suite 300, Mineola, NY 11501, United States

(516) 574-9630

https://www.google.com/maps?cid=7387587768064061142