What is the purpose of a credit shelter trust in estate planning?

• A. Provide lifetime incomes to heirs
• B. Shelter assets from estate taxes
• C. Pay medical expenses
• D. Avoid the need for a will

Answer: (B)

Credit shelter trusts are designed to shield wealth from estate taxes by using the deceased spouse’s unused estate tax exemption. When one spouse dies, assets equal to the unused portion of that exemption are placed into a trust that the surviving spouse can benefit from, but because the trust owns the assets, they aren’t counted in the survivor’s estate for tax purposes at the second death. This preserves more value for heirs by reducing the estate tax that would be due later. It isn’t about funding lifetime incomes, paying medical expenses, or bypassing a will.