Credit shelter trust funding is the process of actually moving assets into a credit shelter, bypass, or family trust at the first spouseTMs death in amounts that fully utilize the deceased spouseTMs estate-tax exemption. Funding can occur through beneficiary designations, retitling of accounts, specific bequests in a will, or allocation of joint or community property shares. Proper funding is essential; a well-drafted trust that remains empty or underfunded fails to deliver expected estate-tax savings or asset-protection benefits for heirs.

Advisors and estate attorneys coordinate credit shelter trust funding by reviewing asset titles, beneficiary forms, and estate documents after the first spouse dies. They ensure that executor and trustee actions align with the planTMs funding formulas, often involving valuation work to determine which assets should go to the CST versus the surviving spouse or marital trusts. Life insurance proceeds and retirement accounts require special attention to avoid unintended tax consequences. Understanding credit shelter trust funding allows advisors to support surviving spouses through a complex, emotionally charged process while preserving the tax benefits contemplated in the original plan.