An estate tax deduction is available for certain gifts made outright or in trust to a spouse. The Marital Gift encompasses any assets not needed to fund the Credit Shelter Trust. This means that there will be no estate tax due in the estate of the first spouse to die. The marital deduction gift is frequently held in trust in order to give the spouse protection from creditors and to assure that the amount remaining in the trust will eventually pass to the children, or as otherwise directed by the first spouse to die. We recommend that most clients place marital gifts in trust so that the assets are protected from the spouse’s creditors. For most people, car accidents are the most likely cause of an unexpected death. Even if one’s spouse has insurance in the event of a car accident in which the other spouse dies, why expose the assets unnecessarily to the spouse’s creditors? If there are no creditors of the spouse and none are likely to occur, and if there are no adverse estate planning reasons (based upon the state of the estate tax law at the time of one’s death), then the marital trust can be “unwound” and the assets simply distributed to the surviving spouse. Our approach is to try to protect against the unknown risks and preserve the assets for one’s family, and make decisions as to distributions from trusts in the future, when the circumstances of the surviving spouse is clearer.
BASIC ESTATE PLANNING DOCUMENTS
The Martial Trust