An exemption trust is a trust designed to drastically reduce or eliminate federal estate taxes for a married couple’s estate. This type of estate plan is established as an irrevocable trust that will hold the assets of the first member of the couple to die.
Does a trust have a personal exemption?
Trust taxable income is generally determined as it is for individuals. However, a trust does not usually itemize deductions, and a trust also has a personal exemption, which is $300 for trusts that are required to distribute all their income annually to beneficiaries and $100 for all other trusts.
What is the marital share in a trust?
A marital trust is a type of irrevocable trust that allows you to transfer assets to a surviving spouse tax free. It can also shield the estate of the surviving spouse before the remaining assets pass on to your children.
When is a marital trust subject to estate tax?
If the deceased spouse’s assets exceed $11.18 million, the excess assets fund the marital trust. Any assets above the exemption are not subject to estate taxes until after the surviving spouse passes away. When the surviving spouse passes away, the surviving spouse still has his or her estate tax exemption.
What should be included in a marital trust?
You can establish a marital trust with the help of an attorney who specializes in estate planning. The trust document must specify all assets and property held in the trust. This can include nearly anything of value. That includes stocks, bonds, mutual funds, cash and physical property.
How does an exemption Trust work in estate planning?
One of these trusts receives assets up to the amount of the estate tax exemption. This trust is often referred to as the “Exemption” or “By-Pass” Trust (i.e., Trust “B”). Any amount of the decedent’s share above the exemption is funded to the other trust (i.e., usually Trust “C”).
