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Charts: Federal Estate Tax Benefits and Asset Protection for Children Can Be Achieved with Credit Shelter Trusts- February 2002 (revised January 2005)

Through the implementation of a more sophisticated estate plan including Credit Shelter Trusts, also commonly referred to as “bypass trusts” or “A/B Trusts,” a married couple can achieve significant estate tax savings as well as provide protection for their children beyond the age of majority. The following charts illustrate these benefits by the comparison of an estate plan consisting of simple wills whereby the spouses leave every thing to each other, and the estate plan whereby the spouses direct their assets to “pour over” into their living trusts. For demonstration purposes, the charts assume that each spouse owns $1.25 million and the husband dies first. If the value of the couple’s assets is higher, the tax savings will be greater. Being unable to forecast which spouse will pass away first, each spouse should have identical estate plans.

2005

	Husband owns $1.25 Million	Wife owns $1.25 Million
Husband dies first: no estate tax due.
	Husband’s Living Trust
Wife dies thereafter:

^*Assumes no growth or appreciation in B Trust. Savings can be greater, because upon the death of surviving spouse, ALL assets within B Trust passes to children ESTATE TAX FREE.

Compare this to the scenario below where the husband and wife have only simple wills, leaving all assets to each other:

2005

Husband owns $1.25 Million	Wife owns $1.25 Million
Husband dies first: No estate tax.
Wife dies thereafter:

Under this scenario, while there is no estate tax due on the Husband’s death, the Husband’s federal exemption has been wasted, and the children do not receive the benefit of asset protection from a trust.

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