A South Dakota Complex Will — Max. Credit Shelter Marital Trust to Children is a specific type of estate planning tool that individuals can use to protect and distribute their assets upon their passing. This type of trust is commonly utilized by married couples who have children from previous marriages and wish to ensure that their assets are properly divided. The primary purpose of a South Dakota Complex Will — Max. Credit Shelter Marital Trust to Children is to maximize the estate tax benefits while providing for a surviving spouse and protecting the interests of the children. The trust allows for the creation of a credit shelter trust (also known as a bypass trust or A/B trust) upon the death of the first spouse. The credit shelter trust is designed to shelter a portion of the deceased spouse's estate from estate taxes, up to the maximum amount allowable under the federal estate tax exemption. This ensures that the deceased spouse's estate tax exemption is fully utilized and not wasted. The surviving spouse can benefit from the income generated by the trust assets and have access to the principal as needed, while the assets remain protected for the benefit of the children. There are different variations of the South Dakota Complex Will — Max. Credit Shelter Marital Trust to Children, including: 1. Traditional A/B Trust: This is the most common type of marital trust used in estate planning. It involves creating two separate trusts upon the death of the first spouse — the "A" trust (marital trust) and the "B" trust (credit shelter trust). 2. Disclaimer Trust: This type of trust allows the surviving spouse to choose whether to fund the credit shelter trust. The surviving spouse can assess their financial situation and elect to disclaim assets into the trust to minimize estate taxes. 3. TIP Trust: TIP stands for Qualified Terminable Interest Property. This type of trust allows the assets to be passed into a trust for the benefit of the surviving spouse, while still ensuring that the assets ultimately pass to the children. The surviving spouse receives income generated by the trust assets for their lifetime, and upon their death, the assets pass to the children. 4. Dynastic Trust: A dynastic trust is designed to provide for multiple generations of beneficiaries, typically grandchildren and beyond. It allows for the preservation and growth of wealth within the family while minimizing estate taxes generation after generation. By utilizing a South Dakota Complex Will — Max. Credit Shelter Marital Trust to Children, individuals can protect their assets, provide for their surviving spouse, and ensure a smooth and efficient transfer of wealth to their children. It is crucial to consult with an experienced estate planning attorney to understand the specific legal requirements and implications of this type of trust.
South Dakota Complex Will - Max. Credit Shelter Marital Trust to Children
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Credit shelter trust (CST) (also called an AB trust or a bypass trust) is a tool used by well-off married individuals to legally maximize their estate tax exemptions. The strategy involves creating two separate trusts after one spouse passes.
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.
The assets you cannot put into a trust include the following: Medical savings accounts (MSAs) Health savings accounts (HSAs) Retirement assets: 403(b)s, 401(k)s, IRAs. Any assets that are held outside of the United States. Cash. Vehicles.
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.
Living trusts provide a variety of benefits that may appeal to you. Creating a living trust in South Dakota gives you control over your assets during life and after death. While your assets are owned in the name of the trust, you will continue to use them as you normally would, so nothing in your daily life changes.
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.