Trust not funded

[Kram BergGold]

If the surviing spouse never bothers to fund a credit shelter trust (she kept all assets in her name) and then dies, can the children correct this omission to avoid or reduce the estate taxes?

[Burke]

No, IMO, because the assets are now considered part of her estate and subject to probate. They can check with their attorney, but I can't see how it can be done retroactively.

[BOB W]

No, IMO, because the assets are now considered part of her estate and subject to probate. They can check with their attorney, but I can't see how it can be done retroactively.

I agree, How can a deceased sign to transfer title to fund a trust?.

[ED SMITH]

Never say never

There are exceptions to almost everything.

A credit shelter trust is a revocable living trust that has 2 parts, A and B. It is sometimes called an A/B trust. It is used where there is a husband and wife. When one dies, their part transfers to the survivors part.

There have been exceptions when the trust hadn't been funded and after death, it was shown that this was the intention of the parties and it was retroactively funded.

The client should seek help from an estate or probate attorney. However, your subsequent question, Mark, indicates that substantial time has elapsed, so there is probably no likelyhood of the trust being funded.

[Tackslawyer]

If the surviing spouse never bothers to fund a credit shelter trust (she kept all assets in her name) and then dies, can the children correct this omission to avoid or reduce the estate taxes?

Not sure how the surviving spouse would have the need for a credit shelter trust - wouldn't the surviving spouses assets use up her applicable credit amount?

Unless you mean the credit shelter trust was never funded by surviving spouse (who I am assuming was PR and trustee of the credit shelter trust and thus had a duty to fund the trust). I'd say surviving spouse could have faced liability for such inaction - and the children should have had a clue when they saw a probable pour-over provision in the first-to-die's will.

IRS would have a tough time asserting 1041s were due from credit shelter trust because it was never funded. The flip side to that is, you would have a tough time showing usage of the first to die's applicable credit amount by virture of the fact that all went to spouse and qualified for the unlimited marital deduction.