Which term describes the trust created to shelter assets using the deceased spouse's exemption?

Which term describes the trust created to shelter assets using the deceased spouse's exemption?

• A. Portable
• B. Unified Gift and Estate Tax
• C. Credit Shelter Trust
• D. Taxable Estate

Answer: (C)

The main idea is using the deceased spouse’s estate tax exemption to shield assets from the surviving spouse’s estate. This is done with a credit shelter trust, also called a bypass trust. At the first spouse’s death, assets up to that spouse’s unused exemption are placed into this irrevocable trust. Because those assets are held in the trust, they are not counted in the surviving spouse’s estate for estate‑tax purposes, allowing more efficient transfer to children or other beneficiaries after the second death. The surviving spouse can receive income from the trust, but the principal remains separate to preserve the exemption for the next generation. Portability describes a way to transfer the unused exemption to the surviving spouse so they can apply it to their own estate, but it doesn’t create a separate trust. The term Taxable Estate refers to what remains subject to tax, not a trust.

The main idea is using the deceased spouse’s estate tax exemption to shield assets from the surviving spouse’s estate. This is done with a credit shelter trust, also called a bypass trust. At the first spouse’s death, assets up to that spouse’s unused exemption are placed into this irrevocable trust. Because those assets are held in the trust, they are not counted in the surviving spouse’s estate for estate‑tax purposes, allowing more efficient transfer to children or other beneficiaries after the second death. The surviving spouse can receive income from the trust, but the principal remains separate to preserve the exemption for the next generation.

Portability describes a way to transfer the unused exemption to the surviving spouse so they can apply it to their own estate, but it doesn’t create a separate trust. The term Taxable Estate refers to what remains subject to tax, not a trust.