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. How are life insurance proceeds taxed?

  3. Is $2,500,000 in savings enough to last our life?

    I am 95 years old and my wife is 88. Our income per year is one hundred thousand. When I die, it will reduce to seven hundred ... Read Answer >>
  4. What percentage of withdrawals from a trust fund is taxed?

    I have inherited a trust fund. This is the first time I have considered pulling money from the account.  ... Read Answer >>
  5. What would the estate tax be on life insurance policy of $25,000?

    $25,000 was paid to the beneficiary of a life insurance policy. What would the estate tax be and do you have to pay an estate ... Read Answer >>
  6. What is the difference between revocable and irrevocable intervivos trusts?

    Learn what an inter-vivos trust is, the difference between an irrevocable and a revocable inter-vivos trust, and why it is ... Read Answer >>
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