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Credit shelter trusts are created after the first spouse dies. Assets are passed tax-free to other beneficiaries after the second spouse dies.
So, for example, if the surviving spouse lived another 10 years and the assets inside the first spouse's "credit shelter" grew to $15 million, the appreciation would pass to the children without estate tax on the increased value, since the estate tax value was "locked in" at the first spouse's death. [75]
When you hear the word "trust" in financial or business terms, you probably think of either Teddy Roosevelt or rich kids who drive Range Rovers in high school. The truth, however, is that trusts...
A charitable remainder unitrust (known as a "CRUT") is an irrevocable trust created under the authority of the United States Internal Revenue Code § 664 [1] ("Code"). This special, irrevocable trust has two primary characteristics: (1) Once established, the CRUT distributes a fixed percentage of the value of its assets (on an annual or more frequent basis) to a non-charitable beneficiary ...
Some creditors may compel payment out of the trust, particularly those who supply the beneficiary with "necessaries" (usually food and shelter, but sometimes clothing and transportation, if these are not extravagant). Most jurisdictions also permit the invasion of spendthrift trust assets to satisfy awards of child support and alimony.
The beneficiaries of a trust are the beneficial owners of equitable interests in the trust assets, but they do not hold legal title to the assets. Thus this kind of trust fulfills the goal of asset protection planning, i.e. to insulate assets from claims of creditors without concealment or tax evasion.
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