What is a credit shelter trust and why does it matter for Minnesota residents?

A credit shelter trust, also called a bypass trust or family trust, is a trust structure that captures the first spouse’s Minnesota estate tax exemption at death rather than allowing all assets to pass outright to the surviving spouse. Because Minnesota does not allow portability, this type of trust may allow married couples to use both spouses’ $3 million exemptions, potentially reducing the overall Minnesota estate tax exposure.