To ensure that you get taxed once when your spouse passes, you should consider a bypass or credit shelter trust. This trust is often utilized by spouses when preparing their estate plans.
The credit shelter trust is the "B" trust in A-B trust plans. This trust is created by either a person's revocable living trust or from a last will.
The trust is usually funded up to the amount of the first spouse's available estate tax exemption. In 2013, this amount would be $5.25 million. The goal is to either minimize or eliminate federal estate taxes due on the death of the surviving spouse.
The trust usually ends when the surviving spouse dies. The credit shelter trust is usually set up to provide an ongoing source of income for the surviving spouse's lifetime.
The trust may continue if there are provisions benefitting children or other beneficiaries. So, when the surviving spouse passes, any assets left over can be kept in trust for the surviving spouse's children or distributed outright.
A benefit of the credit shelter trust is that the assets used to fund this trust do not receive a step-up in basis upon the passing of the surviving spouse.
If you would like more information about Credit Shelter Trusts, please feel free to contact the attorneys at Santaella Legal Group, APC.