Grantor Credit Shelter Trust
For those who are looking for ways to maximize the transfer on their estate, here is an aggressive (i.e., read not well tested in tax court) way of supercharing the commond credit shelter trust.
The basic idea is to turn a credit shelter trust into a grantor trust of the surviving spouse. This allows the surviving spouse to pay the taxes on the trust income without those payments being considered a gift. This is accomplished by creating a lifetime QTIP trust which will then fund the credit shelter trust. You can find the details here.
Since you only receive a large benefit from this technique if the surviving spouse lives for many more years, I don’t think the additional complexity would be worth it unless you knew there was likely going to be a big difference in their life expectancies. For example, if one spouse has come down with terminal cancer while they are both relatively young (and of course they need a lot of money 🙂 that would seem to make them good candidates for this technique. It also solves the problem of having to worry about the reciprocal trust doctrine.
This entry was posted by David on February 2, 2007 at 7:30 pm, and is filed under Estate Planning. Follow any responses to this post through RSS 2.0.Responses are currently closed, but you can trackback from your own site.