Janet & Dan just prepared a Credit Shelter Trust Tax Return for the surviving spouse, Stella, of our deceased client, John (her husband). This Credit Shelter Trust was created through John’s estate plan via his will. Lynn Spencer here from Killingsworth Spencer CPAs with another important tax tip. A Credit Shelter Trust is sometimes referred to as a By-Pass Trust because it is set aside to make use of the estate tax exemption available to a decedent and bypasses being included in the estate of the surviving spouse. The surviving spouse and/or others can receive income from the assets in the Trust, and generally can receive some Principal for health, education, maintenance, and support – HEMS for short. There is a step-up in basis on the assets placed in the CST when the first spouse dies. The most significant advantage may be that the assets remaining in the Trust when the surviving spouse passes away, transfer to the beneficiary’s (set up by decedent) tax free. A Trust Tax Return is required to be filed each year by the Trustee as long as the surviving spouse, “Stella” is alive. CSTs are just one of many estate tax planning tools. If you have a substantial estate, and you would like to learn more about Trusts, or the taxation of them please click here or call us for more information. A taxpayer was conversing with an IRS agent who said, “As a privilege to live and work in the USA, you have an obligation to pay taxes with a smile.” “Thank God,” replied the taxpayer. “I thought you were going to request cash.”