How do I avoid estate taxes?

The most basic device for avoiding estate taxes for married people is the marital deduction credit shelter trust. This is a form of living trust that also has a number of different names for the same trust. It is sometimes referred to as an AB trust or a Bypass trust. Under the federal estate tax there is an unlimited marital deduction. This means that when one spouse dies passing his or her assets to the surviving spouse there is no federal estate tax due at the first spouse's death regardless of the value of the estate. However the real tax bite comes at the death of the second spouse when every dollar above the exemption amount is subject to the federal estate tax. The exemption amount for 2008 is 2 million dollars. The amount of the exemption for 2009 will be 3.5 million dollars. The marital deduction credit shelter trust allows the married couple to take piggy back (another legal term) their exemptions so that at the death of the first spouse to die, the amount of the exemption is segregated into a portion of the trust called the credit shelter which is available for the needs of the surviving spouse, but is not counted in his or her estate at the death of the surviving spouse. In this way you effectively are able to double the exemption at the time of the death of the second spouse to die.