Keith Towns, a financial services specialist with a proven track record in the finance industry, discusses one of the different types of common trusts, Credit Shelter Trusts, and provides investment approaches to this type of trust. Keith is the owner and CEO of California-based financial management firm Emerge Financial Group that provides innovative solutions developed especially for the business sector. |
Credit Shelter Trust, according to Keith, is a common type of trust used by married couples with large estates to prevent federal taxes from being imposed upon the death of one spouse. When one spouse passes away, the maximum amount of property protected from the federal estate tax by virtue of the unified credit is transferred to the Credit Shelter Trust. The assets placed in this trust are intended to benefit the surviving spouse, and will not be taxed in the surviving spouse’s estate upon their subsequent death. This means that the assets held in this trust upon the first spouse’s death will not be subject to taxes in either spouse’s estate, and thus will be transferred to their beneficiaries free of any estate taxes. Since the assets bypass the surviving spouse’s taxable estate and are passed to heirs without being taxed, this type of trust is also sometimes referred to as a Bypass Trust. To learn more about Keith's expertise, visit: http://www.houzz.com/pro/keithtowns/keith-towns
As this trust is designed to benefit the surviving spouse, they are able to enjoy the benefits of the assets held in this trust. For instance, they may be allowed to receive all the assets of the trust in their lifetime. And even though they cannot demand any of the principal of the trust, the trustee may have the discretion to distribute principal to the surviving spouse for specified purposes. Credit Shelter Trusts can either be created under a testamentary trust or living trust, as these provisions don’t take effect until the settlor dies.
Keith says that sometimes a Credit Shelter Trust may mandate payment of income to the surviving spouse annually. In this case, a primary investment objective would be to generate that income. Other Credit Shelter Trusts, on the other hand, allow income to be distributed at the trustee’s discretion to both the surviving spouse and their descendants, which makes investing to generate income less relevant.
In cases where the surviving spouse’s estate no longer faces an estate tax, such as with recent tax law changes, growth might just mean higher income costs to heirs without commensurate estate tax savings. Keith advises that it would be better to move assets out of the trust by terminating the trust if possible, or by permissible distributions. To learn more about charitable tax benefits, visit here
About Emerge Financial Group
Keith Towns is a financial services specialist who has worked in a wide range of corporate and private settings. He is the owner and CEO of Emerge Financial Group, a financial management firm based in Fairfield, California that offers financial solutions to the business sector.
Emerge Financial Group
Address: One Harbor Center, Suite 280, Suisun City, California 94585, United States
Phone: (707) 333-4898
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