Michael A. Milazzo, CLU, ChFC

Registered Principal

The Meridian Financial Company

90 Lawrence Avenue, Suite 4, Smithtown, NY 11787

Phone:  631-979-4223

Fax: 631-656-8199 

Email: meridian@ae.cadaretgrant.com

Website: www.merfinco.com

July/August 2018

Protect that Exclusion

Article Image

While Congress doubled the federal estate tax exemption with the passage of the Tax Cuts and Jobs Act of 2017, a couple who files taxes jointly can still lose a portion of the exclusion if they don’t create a strategy to maximize the full amount. A credit shelter trust, also known as a bypass trust or AB trust, is one such strategy.

The Background
Congress has long debated reducing federal estate taxes, with proponents of the change arguing that estate taxes affect owners of small businesses most, as their assets may be valued highly but are mostly illiquid. These firms with little cash, but with significant illiquid assets, would need to find the cash to pay estate taxes elsewhere or liquidate their firms. This is a painful reality for some family businesses.

Taxes Still Matter
Ultimately, the federal estate tax exemption was doubled to $11.18 million per individual and $22.36 million per couple, indexed to inflation. (This provision expires in 2025.) But one thing that hasn’t changed is the potential for couples to lose half of their estate tax exemption should one of them die. That’s where a credit shelter trust can come into play.

How It Works
A credit shelter trust protects the full exemptions of both spouses. You would work with a professional to create the trust and include the trust’s terms in your will. It’s revocable until the death of one spouse, whose estate assets are transferred to the trust and therefore don’t inflate the surviving spouse’s estate, which could place them over the individual exemption limit. Then the trust becomes irrevocable.

The trust typically allows the surviving spouse to access the trust’s income and even principal. When the surviving spouse dies, the heirs become the beneficiaries of the trust. Talk to an estate planning attorney to learn more.


Enter your Name and Email address to get
the newsletter delivered to your inbox every month.


Enter your Name, Email Address and a short message. We'll respond to you as soon as possible.

Michael A. Milazzo is a Registered Representative of and offers securities through Cadaret, Grant & Co, Inc, a member of FINRA and SIPC. The Meridian Financial Company and Cadaret, Grant are separate entities. I am registered to sell Securities in the following States: NY, PA, NC, FL, CO, ID.
The Meridian Financial Company and LTM Client Marketing, Inc. are unrelated companies. This publication was prepared for the publication’s provider by LTM Client Marketing, an unrelated third party. Articles are not written or produced by the named representative.

The information and opinions contained in this web site are obtained from sources believed to be reliable, but their accuracy cannot be guaranteed. The publishers assume no responsibility for errors and omissions or for any damages resulting from the use of the published information. This web site is published with the understanding that it does not render legal, accounting, financial, or other professional advice. Whole or partial reproduction of this web site is forbidden without the written permission of the publisher.