$11.4 million dollars??! I don’t have $11.4 million dollars, but should I still have a credit shelter trust?

The $11.4 million exemption for 2019 will remain in place and may increase slightly from year to year since it may be adjusted for inflation.  The TCJA is slated to expire in 2025, so it may be that the exemption goes back.

The question is whether it will remain at the $11.4 million number or go back, and if it does go back then- to what level will it go back? The question on many people’s minds is whether credit shelter trusts are still necessary or even advisable because of the new exemption amount dinging the $11 million mark and with portability without a foreseeable end date. The truth is the credit shelter trust continues to be a good option because it has so many uses beyond tax planning. In other words, you don’t have to have over $11million to have a trust.   Some of the benefits of the credit shelter trust are that it can be used to shield assets in the event that a surviving spouse remarried and then divorces; or to protect the assets from creditors; or the balance the needs of blended families; or for privacy; and to allocate distributions when you want your friends and family to get your stuff.  The credit shelter trust is a great tool for blended families.  For instance, at the death of the first spouse, the assets of the deceased spouse are placed into the credit shelter trust.  If the assets go beyond the exclusion, the excess can go into a trust qualifying for the marital deduction or to the surviving spouse directly.  The credit shelter trust is irrevocable which helps with creditors and allows one to take advantage of the estate tax deduction. The downside is it does require its own tax payer identification number and taxes.

If you have any questions regarding domestic relations/ family law matters, please contact Anna M. Petronzio, apetronzio@ps-law.com, 216-381-3400.