Providing Credit Shelter Through New York State Trusts

To fully take advantage of their combined estate tax exclusions, married couples use credit shelter trusts. This type of planner may be especially useful to couples living in states with state estate taxes in addition to federal estate taxes.

Credit shelter trusts will only be accessible to ultra-rich estates in 2021 as the federal estate tax limit is set at $11.7 million. Federal estate taxes are not imposed on the first $11.7 million of an estate. Additionally, a married couple could use both spouses’ exemption amounts to avoid paying federal estate taxes if their combined estate exceeded $23.4 million. There is the concept of portability within the federal estate and gift tax regulations in New York City. In other words, if one spouse does not use the entire exemption amount, the remaining amount is portable to the surviving spouse at their ultimate death. A surviving spouse, however, must formally elect to utilize their spouse’s remaining estate tax exemption upon the death of their first spouse.

If the first spouse dies leaving their entire estate to the second spouse, there will be no estate tax due. The federal estate tax exemption amount for married couples is $5.95 million. Furthermore, the couple may be liable for estate taxes if they live in a state with a separate estate or inheritance tax. The estate tax-exempt amount of one spouse cannot be transferred to the other in New York state. In the event of an estate not planned properly, the couple’s estate, as well as the second spouse’s estate, may be liable for estate tax. The value of a married couple’s assets is generally split up by them, and an amount equal to the current estate tax exemption amount for the surviving spouse is positioned in a credit shelter trust. The assets can then be passed to the survivor without becoming part of their spouse’s estate and passing directly to them.

We are ready to answer any questions that you may have and would be happy to set up a free case evaluation with one of our attorneys.

Roman Aminov Esq. Estate, Probate & Elder Law of Queens – 147-17 Union Tpke, Queens, NY 11367, (347)766 2685.