Credit Shelter Trust - CST

AAA

DEFINITION of 'Credit Shelter Trust - CST'

A type of trust that allows a married investor to avoid estate taxes when passing assets on to heirs. The trust is structured so that upon the death of the investor, the assets specified in the trust agreement (up to a specified maximum dollar value) are transferred to the beneficiaries named in the trust (normally the couple's children). However, a key benefit to this type of trust is that the spouse maintains rights to the trust assets and the income they generate during the remainder of his or her lifetime.

This type of trust is also referred to as an "AB Trust".

INVESTOPEDIA EXPLAINS 'Credit Shelter Trust - CST'

In certain circumstances, such as the need to fund healthcare expenses, the surviving spouse may even tap into the principal of the trust assets, not just their generated income. When the surviving spouse eventually dies, the assets are transferred wholly to the beneficiaries (children) without any estate taxes levied. This can amount to significant tax savings and can be very valuable, especially considering that the surviving spouse essentially maintains full use of the assets while they are in the trust anyway.

RELATED TERMS
  1. Bypass Trust

    An estate-planning device used to pass down assets after death ...
  2. Beneficiary

    Anybody who gains an advantage and/or profits from something. ...
  3. Trust

    A fiduciary relationship in which one party, known as a trustor, ...
  4. Trustee

    A person or firm that holds or administers property or assets ...
  5. Qualified Terminable Interest Property ...

    A type of trust that enables the grantor to provide for a surviving ...
  6. Generation-Skipping Trust

    A type of legally binding trust agreement in which the contributed ...
Related Articles
  1. Retirement

    Establishing A Revocable Living Trust

    This arrangement allows you to have more control over your estate - both before and after your death.
  2. Options & Futures

    Getting Started On Your Estate Plan

    With some preparation, you can save your heirs from paying a hefty estate tax. Here are some tips.
  3. Retirement

    Get A Step Up With Credit Shelter Trusts

    Don't let unexpected taxes eat away at your inheritance or burden your heirs.
  4. Options & Futures

    Your Will: Why You Need A Power Of Attorney And Beneficiaries

    What would happen if you were suddenly unable to manage your financial affairs? Preparation is the best protection.
  5. What's a Trust Fund?
    Personal Finance

    What's a Trust Fund?

    A trust fund is a fund comprised of a variety of assets, established by a grantor, to provide financial security to an individual, most often a child or grandchild - or organizations, such as ...
  6. A new Supreme Court ruling has some financial advisors rushing to set up trusts to help protect inherited IRAs. Is that necessary?
    Investing Basics

    How Advisors Can Protect Inherited IRAs

    A new Supreme Court ruling has some financial advisors rushing to set up trusts to help protect inherited IRAs. Is that necessary?
  7. Retirement

    What's the difference between a financial advisor and a financial planner?

    Seeking professional advice from a financial advisor may involve asking for financial help from a certified financial planner, stockbroker or an accountant.
  8. Personal Finance

    Top 10 Money Mistakes New Parents Make

    Although having a child is an exciting and exhilarating experience, it is very easy to lose track of finance or make unwise decisions with money.
  9. Home & Auto

    Why Your Will Should Name Designated Beneficiaries

    Find out how to make the tough decisions when it comes to choosing who will receive your assets and how they will be paid out.
  10. Retirement

    Should You Convert Your IRA?

    Discover the factors you must weigh to make this decision.

You May Also Like

Hot Definitions
  1. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  2. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  3. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  4. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  5. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center