Credit Shelter Trust
While there is no federal estate tax for decedents dying in 2010, the current Internal Revenue Code imposes a federal estate tax on those dying in 2011 or later with a top marginal rate of 35%. In addition, current law would allow each decedent a unified credit against estate tax allowing a decedent to protect up to $5,000.000 from federal estate tax from this provision. A married couple with a joint estate which exceeds $5,000,000 in value must consider establishing a credit shelter trust (also called a "CRUT") either in their will or revocable living trust. While leaving your entire estate to your spouse outright might seem like a good idea because it will result in no federal estate tax on the first estate, it will cause the surviving spouse's taxable estate to contain all of the couple's assets for estate tax purposes. If the total of these assets exceeds $5,000,000 (including life insurance) there will likely be a federal estate tax.
A CRUT (also called a "bypass" trust) will allow up to $5,000,000 of the estate of the first spouse to die to pass tax free to the next generation, while allowing the surviving spouse to enjoy those assets during his or her lifetime. The use of a bypass trust will allow a married couple to shelter up to $10,000,000.00 from the federal estate tax. Since the Connecticut Estate Tax allows a $3,500,000.00 exemption per estate, in addition to the marital deduction, a married couple utilizing the credit shelter trust can shelter a total of $7,000,000 from Connecticut Estate Tax. The $1,500,000.00 difference between the federal estate tax exemption and Connecticut estate tax exemption presents complicated options to an executor.
The area of federal estate tax has been in flux for the past several years and likely will see more changes in the years to come. Simple changes by Congress or the Connecticut Legislature can render obsolete even the best planned estates. Taxpayers should regularly consult with their estate planning attorney to make sure their estate plan is current and effective. Attorney Rubino is a highly experienced tax attorney who will assist you in making the right elections for federal and Connecticut estate tax purposes.
A CRUT (also called a "bypass" trust) will allow up to $5,000,000 of the estate of the first spouse to die to pass tax free to the next generation, while allowing the surviving spouse to enjoy those assets during his or her lifetime. The use of a bypass trust will allow a married couple to shelter up to $10,000,000.00 from the federal estate tax. Since the Connecticut Estate Tax allows a $3,500,000.00 exemption per estate, in addition to the marital deduction, a married couple utilizing the credit shelter trust can shelter a total of $7,000,000 from Connecticut Estate Tax. The $1,500,000.00 difference between the federal estate tax exemption and Connecticut estate tax exemption presents complicated options to an executor.
The area of federal estate tax has been in flux for the past several years and likely will see more changes in the years to come. Simple changes by Congress or the Connecticut Legislature can render obsolete even the best planned estates. Taxpayers should regularly consult with their estate planning attorney to make sure their estate plan is current and effective. Attorney Rubino is a highly experienced tax attorney who will assist you in making the right elections for federal and Connecticut estate tax purposes.