A trust funded with the applicable exclusion amount to avoid estate taxes is called a ______ shelter trust.

A trust funded with the applicable exclusion amount to avoid estate taxes is called a ______ shelter trust.

• A. Education
• B. Credit
• C. Charitable
• D. QTIP

Answer: (B)

Using the deceased spouse’s unused exclusion amount to shield assets from estate taxes is the function of a credit shelter trust. The term “credit” comes from the estate tax credit—the amount of the exemption that can be applied to transfers without tax. By funding a trust with that amount, those assets are kept out of the surviving spouse’s taxable estate when the survivor dies, effectively using both spouses’ exemptions to minimize estate taxes overall. This is why the right term is credit shelter trust: it designates a bypass of the estate tax up to the applicable exclusion amount. An education trust is built to fund education costs, a charitable trust benefits a charity, and a QTIP trust preserves a marital deduction with the surviving spouse’s control but doesn’t specifically shelter assets using the deceased spouse’s exclusion to reduce taxes at the second death.

Using the deceased spouse’s unused exclusion amount to shield assets from estate taxes is the function of a credit shelter trust. The term “credit” comes from the estate tax credit—the amount of the exemption that can be applied to transfers without tax. By funding a trust with that amount, those assets are kept out of the surviving spouse’s taxable estate when the survivor dies, effectively using both spouses’ exemptions to minimize estate taxes overall. This is why the right term is credit shelter trust: it designates a bypass of the estate tax up to the applicable exclusion amount.

An education trust is built to fund education costs, a charitable trust benefits a charity, and a QTIP trust preserves a marital deduction with the surviving spouse’s control but doesn’t specifically shelter assets using the deceased spouse’s exclusion to reduce taxes at the second death.