Credit Shelter Trust Law and Legal Definition

A credit shelter trust is a trust for the benefit of a surviving spouse, created to avoid estate taxes at a first spouse’s death and which takes advantage of the available federal estate tax credit. It may also be referred to as an A/B trust, B trust, bypass trust, exemption equivalent, unified credit trust.

It is a trust that is established in the will or living trust of the first to die of a married couple. The trust provides that when the first spouse dies, the trust will will be funded with the maximum amount of property that can pass estate tax free (the "applicable exclusion amount") in that spouse's estate, and also passes estate tax free when the surviving spouse dies.