Exemption Trust

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DEFINITION of 'Exemption Trust'

A trust whose purpose is to drastically reduce or eliminate federal estate taxes for a married couple's estate. This type of estate plan sets up an irrevocable trust that will hold the assets of the first spouse to die.

INVESTOPEDIA EXPLAINS 'Exemption Trust'

The amount will not be taxed for federal estate tax purposes when the second spouse dies.

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RELATED FAQS
  1. How is cost basis calculated on an inherited asset?

    Typically, the cost basis on inherited assets is the fair market value as of the time of the decedent's death or actual transfer ... Read Full Answer >>
  2. How does the trust maker transfer funds into a revocable trust?

    Once a revocable trust is created, a trust maker transfers funds or property into the trust by including them in a list with ... Read Full Answer >>
  3. What is the difference between comprehensive income and gross income?

    Comprehensive income and gross income are similar, but comprehensive income is a specific term used on a company's financial ... Read Full Answer >>
  4. What is the difference between a revocable trust and a living trust?

    A revocable trust and living trust are separate terms that describe the same thing: a trust in which the terms can be changed ... Read Full Answer >>
  5. How exactly does one go about revoking a revocable trust?

    The basic steps involved in revoking a revocable trust are fairly simple, and include transfer of assets and an official ... Read Full Answer >>
  6. What tax breaks are afforded to a qualifying widow?

    The tax breaks accorded to qualifying widows or widowers include being able to use a tax filing status that allows for a ... Read Full Answer >>
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