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Credit Shelter Trust Versus Simple Will
A Tax Comparison

The credit shelter trust utilizes the unified credits of both spouses. The tax savings will vary depending on the year of death, the size of the estate, the rate of growth for estate assets between the deaths of the two spouses and the "applicable exclusion amount" in effect at date of death.

The chart below illustrates the approximate savings in a variety of estates. (Assumes no growth of assets between deaths.)

Amounts reflect deduction of unified credit for 2000. For 2000 and 2001, $675,000 is the amount of assets protected by an individual's unified credit. The amount of assets protected by the unified credit is termed the "applicable exclusion amount." This amount will change each year, as follows: $700,000 in 2002 and 2003; $850,000 in 2004; $950,000 in 2005; $1,000,000 in 2006 or thereafter.
2 With a trust that splits the estate in half when the first spouse dies (typical of marital deduction trusts created prior to 1982), a portion of the tax must be paid when the first spouse dies. Even though the overall combined death tax may
3 be less, many estate owners prefer to defer taxation until the death of the second spouse. Tax is paid after the death of the second spouse to die.