A Louisiana Complex Will — Max. Credit Shelter Marital Trust to Children is a legal instrument that assigns specific assets to different individuals or entities in order to effectively manage and protect one's estate. In this type of will, the testator (the person creating the will) designates a trust to benefit their spouse, known as the Marital Trust, and also includes a Credit Shelter Trust for the benefit of their children. This arrangement is often used to maximize estate tax savings. The Marital Trust is designed to provide financial support and security for the surviving spouse while still preserving the assets for eventual distribution to the testator's children upon the spouse's death. This trust typically ensures the surviving spouse has access to income and, in certain cases, the principal of the trust, depending on the provisions outlined in the will. The Credit Shelter Trust, also known as a bypass trust or a family trust, is established to shelter assets up to the maximum estate tax exemption amount from being subject to estate taxes upon the surviving spouse's death. This trust provides for the children's needs and may distribute income or principal to them at the discretion of the trustee, as outlined in the will. Additionally, there can be variations of the Louisiana Complex Will — Max. Credit Shelter Marital Trust to Children, depending on the specific circumstances and goals of the testator. These variations may include: 1. Testamentary Special Power of Appointment: This provision allows the surviving spouse to have a limited power to appoint the assets from the Credit Shelter Trust to the children or other beneficiaries upon their death. 2. Generation-Skipping Transfer (GST) Tax Planning: If the testator aims to skip a generation and transfer assets directly to grandchildren or future descendants, a GST planning provision can be added to the will. 3. Trust Protector: A Trust Protector provision allows someone, other than the trustee, to oversee the trust and make decisions regarding certain matters, ensuring the interests of the beneficiaries are always protected. 4. Special Needs Trust: If a child has special needs, a Special Needs Trust can be included in the will to ensure the child receives ongoing care and support without affecting their eligibility for government assistance. It is worth noting that complex estate planning, like the Louisiana Complex Will — Max. Credit Shelter Marital Trust to Children, requires the assistance of an experienced estate planning attorney. Consulting with an attorney can help ensure that the will accurately reflects one's wishes, meets all legal requirements, and provides the intended benefits to the surviving spouse and children while minimizing estate taxes.
Louisiana Complex Will - Max. Credit Shelter Marital Trust to Children
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The primary benefit of CSTs is that the surviving spouse can use the trust's principal and income during the remainder of their lifetime, for example, for medical or educational expenses. The remaining assets then pass to the beneficiaries and are not subject to estate taxes.
This trust is irrevocable and will pass to beneficiaries other than the surviving spouse (usually their children). The surviving spouse must follow the trust's plan without overly benefiting from its operation, but this trust often passes income to the surviving spouse to live on for the rest of their life.
When the credit shelter trust is initially funded upon the death of one spouse, the assets that are placed under the trust receive a step-up in basis. This is an important consideration, because any assets held in a CST don't receive a second step-up in basis upon the death of the surviving spouse.
Upon the death of the surviving spouse, the trust transfers to the heirs, who are exempt from the estate tax that would have resulted from a combined inheritance. Disadvantages of a CST include formation costs and the surviving spouse's lack of control.
Credit Shelter Trust vs Marital Trust - Is a Marital Trust the Same as a Credit Shelter Trust? No. A Marital Trust is a type of Credit Shelter Trust. You and your spouse can use a Marital Trust to pass assets to a surviving spouse, children or grandchildren.
The tax basis of the assets in a CST is stepped up only once?at the death of the first spouse?unlike with portability, where the tax basis would be stepped up a second time upon the death of the second spouse.
Typically, assets you place in trust for your beneficiaries are eligible for a step-up in basis if the trust is revocable, and therefore considered part of your taxable estate. But with an irrevocable trust (which exists outside of your estate), trust assets do not receive a step-up in tax basis.