Exemption Trust

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.

BREAKING DOWN '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 can a trust lower federal transfer tax liability?

    A trust is an arrangement in which an individual or entity controls property or funds on behalf of someone else without actually ... Read Answer >>
  2. What is the difference between a revocable trust and a living trust?

    Learn how a revocable trust and living trust are two terms used to describe the same thing and what the key provisions are ... Read Answer >>
  3. What is the difference between a revocable trust and an irrevocable trust?

    Find out more about irrevocable trusts, revocable trusts and the main differences between them. Read Answer >>
  4. How do I list the beneficiaries of my life insurance policies if I have a trust? ...

    Because most states protect life insurance policies from creditors, most buyer questions come from the confusion created ... Read Answer >>
  5. What is estate planning?

    Estate planning involves making plans for the transfer of your estate after death. Your estate is all the property that you ... Read Answer >>
  6. What is the difference between an intervivos trust and a testamentary trust?

    Understand the differences between a testamentary trust and an inter-vivos (living) trust, and learn why each is important ... Read Answer >>
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