What is a credit trust, and why do I need it?

A credit trust is a trust that the deceased spouse establishes under his or her Will for the benefit of the surviving spouse. The trust is funded with a portion of the deceased spouse’s assets up to the estate tax exemption amount. Usually, your spouse will be the trustee of this credit trust. The assets can be used for your spouse’s usual expenses at his/her discretion. By directing assets to this trust rather than outright to the surviving spouse, the deceased spouse preserves his or her exemption amount and avoids estate taxes on the same assets upon the surviving spouse’s death. If your assets exceed the Washington estate tax exemption amount of $2,193,000, you should consider a credit trust as part of your estate plan.