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Definition: Credit Shelter Trust - CST
A trust which is used to transfer the interest from an estate to a person’s spouse or any heir without actually transferring the ownership. The ownership will be transferred to the heir ones the beneficiary of the interest of trust dies.
When a person dies and transfers his estate to his heirs or spouse they are liable to pay the estate tax which he was paying earlier.
But if he creates a Credit Shelter Trust and transfers the ownership to his heir the tax would not be charged on the heirs but the interest from the estate will be received by the spouse till the death. This is particularly useful for married people.
Even if a person dies, the benefits are given to the children, who are the beneficiaries. No estate taxes are levied to them. This helps in avoiding paying significant amount of taxes.
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