If you’re concerned about estate taxes or want to preserve wealth for your surviving spouse and children, a Credit Shelter Trust (also called a Bypass Trust or Family Trust) may be part of the solution.
While federal estate tax only applies to very large estates, a credit shelter trust can still offer important benefits for high-net-worth families, blended families, and second marriages—especially when long-term asset protection and control are key.
What Is a Credit Shelter Trust?
A Credit Shelter Trust is a type of irrevocable trust used by married couples to take full advantage of each spouse’s federal estate tax exemption.
Here’s how it works:
- When the first spouse dies, the trust is funded with assets up to the federal estate tax exemption amount.
- These assets are held in trust for the benefit of the surviving spouse and/or children.
- The trust is not included in the surviving spouse’s estate—so it avoids estate tax when they die.
In 2024, the federal estate tax exemption is $13.61 million per individual. Married couples can shield up to $27.22 million from estate tax with the right planning.
Do You Need a Credit Shelter Trust in Georgia?
Maybe—if any of these apply:
- Your combined estate exceeds $10–15 million, and you’re planning for future tax law changes (the exemption is scheduled to drop in 2026).
- You’re in a second marriage and want to preserve wealth for children from a prior relationship.
- You want to control asset distribution after your spouse’s death, rather than leave everything outright.
- You’re focused on long-term asset protection for your family.
Georgia does not have a state estate tax, but federal estate tax could still apply if your estate is large enough.
Credit Shelter Trust vs. Portability
The IRS allows portability, meaning a surviving spouse can use any unused estate tax exemption from the first spouse to die. But portability:
- Must be elected with a timely filed estate tax return
- Doesn’t protect future appreciation of assets
- Doesn’t apply to Generation-Skipping Transfer Tax (GST) planning
A credit shelter trust locks in the exemption and shields growth from future estate tax exposure.
Benefits of a Credit Shelter Trust
- Maximizes estate tax savings
- Protects assets from remarriage, creditors, or mismanagement
- Preserves control over how assets are distributed after both spouses die
- Can include spendthrift provisions to limit risky behavior by beneficiaries
Is It Still Relevant with Today’s High Exemption?
Yes—especially with the federal exemption scheduled to drop significantly in 2026 (possibly back to ~$6 million per person). If you have a sizable estate, failing to plan now could mean a large tax bill later.
Talk to Hurban Law About Trust Strategies That Work
At Hurban Law, LLC, we help Georgia families create trust-based estate plans that reduce taxes, protect loved ones, and preserve wealth for future generations. If you’re wondering whether a credit shelter trust fits into your plan, we can help you evaluate the pros and cons based on your goals and net worth.
Contact us today to build a plan that protects what you’ve worked for.
