The Credit Shelter Provision (sometimes called a Credit Shelter Trust provision) is a built-in estate planning feature designed to help married couples make the most of available estate tax exemptions.
It’s automatically included in many Wills as a way to preserve potential tax benefits and provide long-term financial protection for a surviving spouse, without requiring any action upfront.
Why Is This Included?
When one spouse passes away, this provision allows certain assets to be set aside in a special Trust if needed to help:
- Reduce or manage potential estate taxes
- Preserve valuable federal or state tax exemptions
- Provide financial support for the surviving spouse during their lifetime
This planning can be especially helpful for couples with larger estates or assets that may grow over time.
How Does It Work?
- After the first spouse passes, the surviving spouse may have the option to disclaim (decline) part of an inheritance.
- Any assets that are disclaimed can then flow into a Credit Shelter Trust instead of passing outright.
- The Trust is designed to:
- Provide income (and, if needed, principal) to the surviving spouse
- Preserve potential tax advantages
- Protect assets for future beneficiaries (such as children)
Keep in mind that this provision is optional in practice. It only comes into play if it makes sense based on the estate, tax laws at the time, and professional guidance.
Does This Change Anything for Me Right Now?
Including a Credit Shelter Provision does not require you to take any action and does not change how your Will works day-to-day.
It’s simply a planning safeguard that is there just in case it’s helpful in the future!
What If I’m Not Married?
If you’re not married, this provision does not apply to you and has no effect on your estate plan. You don’t need to remove it or make any changes.
Will My Spouse Still Be Taken Care Of?
The Credit Shelter Provision is specifically written to ensure that:
- The surviving spouse can receive income from the trust
- Additional funds can be used for their health, support, and living expenses
- They can continue living in a shared residence, if applicable
The goal is to balance financial security for the surviving spouse with long-term estate planning benefits.
Do I Need an Attorney to Use This?
You do not need an attorney just to have this provision included. However, if this provision ever becomes relevant after a spouse passes away, it’s common (and recommended) for the surviving spouse to consult an estate planning attorney or tax professional to decide whether using it makes sense based on current laws.
Bottom line:
The Credit Shelter Provision is a proactive, protective feature for married couples that can provide your loved ones with more flexibility and protection in the future. It is not intended to complicate your plan, and it does not require action on your part at this time.
If you have questions about how this fits into your overall plan, our Member Support team is always happy to help or point you toward additional resources.
Need Help?
If you have any questions or encounter issues, our Member Support Team is here to help. You can contact us at support@trustandwill.com or by phone or live chat.