Married couples creating a Tennessee estate plan frequently start with a seemingly simple goal:

“When I die, I want my spouse taken care of, and when we are both gone, I want everything to go to our children.”

The difficult part is deciding how to accomplish it.

Should everything simply pass to the surviving spouse? Should the deceased spouse’s assets go into a Credit Shelter Trust? Or should the estate use a Marital Share Plan, in which assets are held in a marital trust for the surviving spouse?

These strategies can look similar because both can involve trusts benefiting the surviving spouse. But their tax treatment—and sometimes their long-term planning consequences—can be very different.

For Tennessee couples in 2026, the decision has become particularly interesting. Tennessee no longer imposes its former inheritance tax for deaths occurring after 2015, while the federal estate and gift tax exemption is historically high.

That means the old assumption that every wealthy married couple needs a traditional A/B Credit Shelter Trust deserves another look.

For many families, a Marital Share Plan may provide greater flexibility and potentially better income-tax results. For others—particularly very wealthy families or those with rapidly appreciating assets—the Credit Shelter Trust can still provide important advantages.

Here is the difference.

First: What Is a Credit Shelter Trust?

A Credit Shelter Trust, also called a:

• Bypass Trust;
• Family Trust;
• B Trust; or
• Exemption Trust,

is generally created when the first spouse dies.

Instead of passing the deceased spouse’s assets outright to the surviving spouse, some assets are transferred into an irrevocable trust.

The surviving spouse can usually benefit from the trust during his or her lifetime.

Depending on the document, the spouse might receive:

• income;
• distributions for health;
• distributions for education;
• distributions for maintenance and support; and
• other distributions permitted by the trust.

The key, however, is that the surviving spouse generally does not own the trust assets outright.

When properly structured, the Credit Shelter Trust is designed so that its assets are not included in the surviving spouse’s taxable estate at the survivor’s death.

That is why it is called a “bypass” trust.

The assets effectively bypass the surviving spouse’s estate.

What Is a Marital Share Plan?

The phrase Marital Share Plan can describe different drafting structures, so the actual trust document always controls.

Generally, however, the concept is that some or all of the deceased spouse’s property is allocated to a marital share or marital trust for the surviving spouse rather than automatically funding a traditional Credit Shelter Trust.

A common version is a Qualified Terminable Interest Property Trust, better known as a QTIP Trust.

A QTIP can provide lifetime benefits to the surviving spouse while allowing the deceased spouse to determine who ultimately receives the property.

That makes it especially useful when someone wants to say:

Take care of my spouse for life, but after my spouse dies, I want what remains to go to my children.

Federal tax law allows qualifying QTIP property to receive the marital deduction if the appropriate election is made. The IRS explains that the surviving spouse generally must have a qualifying income interest for life, including entitlement to all trust income at least annually, and the executor makes the QTIP election on the federal estate tax return.

That creates a major tax distinction.

Credit Shelter Trust: Generally designed to stay outside the surviving spouse’s taxable estate.

QTIP Marital Trust: Receives the marital deduction at the first death but is generally included in the surviving spouse’s gross estate later.

That difference drives much of the planning analysis.

An Example

Assume David and Sarah live in Tennessee and have a combined $8 million estate.

David owns $4 million.

Sarah owns $4 million.

David dies first.

There are several ways David’s $4 million could be handled.

Option 1: Outright to Sarah

David could simply leave Sarah $4 million.

Sarah would then control approximately $8 million.

Simple.

But Sarah would also have complete ownership of David’s assets.

She could spend them, gift them, change beneficiaries or ultimately leave them to someone other than David’s intended beneficiaries.

Option 2: Credit Shelter Trust

David’s $4 million could instead fund a Credit Shelter Trust.

Sarah could receive benefits from it.

But if properly structured, the trust assets could remain outside Sarah’s taxable estate when she eventually dies.

Option 3: Marital Trust

David’s $4 million could instead fund a qualifying marital trust.

Sarah could receive the required benefits during her lifetime.

David could still determine who receives the remaining property after Sarah’s death.

But unlike the Credit Shelter Trust, the marital trust property would generally be included in Sarah’s estate at her death.

At first glance, that sounds worse.

It isn’t necessarily.

For many Tennessee families, inclusion in the survivor’s estate may actually produce a valuable income-tax advantage.

The Basis Issue Can Change the Answer

One of the most overlooked issues in modern estate planning is income-tax basis.

Suppose David owns stock for which he originally paid $500,000.

When David dies, it is worth $2 million.

Property included in David’s estate can generally receive a basis adjustment at his death.

Now suppose the stock continues appreciating.

When Sarah dies 20 years later, it is worth $6 million.

If the stock has remained in a Credit Shelter Trust and is excluded from Sarah’s gross estate, it generally will not automatically receive another basis adjustment merely because Sarah died.

That can leave substantial unrealized appreciation.

But suppose the stock instead resides in a marital trust that is included in Sarah’s estate.

Potentially, the stock receives another basis adjustment at Sarah’s death.

That can make an enormous difference in capital-gains taxes for the children.

Why This Matters More in 2026

The federal estate and gift tax basic exclusion amount is $15 million per person in 2026.

That dramatically changes the calculation.

Consider a Tennessee couple worth $6 million.

Their primary concern probably isn’t federal estate tax.

Yet an old estate plan might automatically create a Credit Shelter Trust when the first spouse dies.

The family could end up sacrificing a potential second basis adjustment to solve an estate-tax problem it doesn’t actually have.

That is one reason an older A/B trust should not simply be assumed to remain optimal.

The Fundamental Trade-Off

The comparison can be summarized this way:

Issue	Credit Shelter Trust	Marital/QTIP Share
Benefits surviving spouse	Yes	Yes
Can preserve assets for children	Yes	Yes
Marital deduction at first death	Generally no	Generally yes
Included in survivor’s estate	Generally no	Generally yes
Future appreciation outside survivor’s estate	Generally yes	Generally no
Potential basis adjustment at survivor’s death	Generally no automatic second adjustment	Generally yes if included
Useful for blended families	Yes	Yes
Protects against survivor changing remainder beneficiaries	Yes	Yes
Best suited solely to smaller estates	Often unnecessary for tax purposes	Frequently attractive
Particularly valuable for rapidly appreciating large estates	Potentially	Depends on circumstances

The important point is that estate-tax exclusion isn’t always the goal anymore.

Sometimes inclusion is valuable.

The Credit Shelter Trust’s Big Advantage: Appreciation

Now change our example.

Suppose the Tennessee couple isn’t worth $6 million.

They’re worth $25 million.

One spouse owns a company worth $8 million.

That business could eventually be worth $30 million.

Now the Credit Shelter Trust becomes much more interesting.

Suppose the $8 million business interest passes to a properly structured Credit Shelter Trust when the first spouse dies.

Twenty years later it is worth $30 million.

Potentially, the entire $30 million remains outside the surviving spouse’s taxable estate.

That means the Credit Shelter Trust didn’t merely shelter the original $8 million.

It sheltered $22 million of subsequent appreciation as well.

Portability doesn’t accomplish exactly the same thing.

Doesn’t Portability Make the Credit Shelter Trust Unnecessary?

Portability is one reason Credit Shelter Trusts are used less automatically than they once were.

Federal law permits a surviving spouse, under certain circumstances, to use the deceased spouse’s unused federal estate tax exclusion—the Deceased Spousal Unused Exclusion, or DSUE.

But portability isn’t automatic in the sense that families can simply ignore the first death.

An executor generally elects portability by timely filing a complete federal estate tax return, Form 706.

The distinction between portability and a Credit Shelter Trust is important.

Suppose Husband has $5 million of unused exemption.

Portability can potentially preserve that $5 million exemption amount for Wife.

But imagine $5 million of assets instead goes into a Credit Shelter Trust and grows to $15 million.

Potentially, the entire $15 million remains outside Wife’s taxable estate.

The appreciation occurs inside the trust.

That can be considerably more valuable for very wealthy families.

Why a Marital Share Plan Can Be Attractive

For families unlikely to owe estate tax, however, the priorities can reverse.

Instead of trying desperately to keep property out of the surviving spouse’s estate, planners may intentionally want estate inclusion.

Why?

Because the estate-tax bill may still be:

$0.

Meanwhile, estate inclusion can potentially produce favorable basis consequences.

That creates one of the great paradoxes of modern estate planning:

Sometimes putting assets into the taxable estate can actually save the family taxes.

The relevant tax may simply be capital-gains tax rather than estate tax.

Both Trusts Can Protect the Children’s Inheritance

There is another misconception worth addressing.

Choosing a marital trust doesn’t necessarily mean giving the surviving spouse unrestricted control.

Suppose Mark has two children from his first marriage.

He marries Jennifer.

Mark wants Jennifer financially secure if he dies first, but he wants his assets ultimately passing to his children.

An outright transfer to Jennifer creates uncertainty.

Jennifer could later:

• change her will;
• change beneficiaries;
• remarry;
• make gifts to her new spouse;
• commingle assets; or
• ultimately leave the property to her own children.

A properly structured marital/QTIP trust provides another solution.

Jennifer can receive lifetime benefits while Mark determines who receives the remainder.

QTIP planning is commonly used precisely for this type of blended-family objective, and the IRS rules permit the marital deduction while preserving the deceased spouse’s control over the ultimate disposition of the trust property.

So the choice isn’t:

Credit Shelter Trust = protection

versus

Marital Trust = no protection.

Both can potentially provide substantial control and protection.

The tax treatment is different.

Tennessee Makes the Analysis Particularly Interesting

Tennessee repealed its inheritance tax for deaths occurring after December 31, 2015.

That removes a state death-tax consideration that once influenced Tennessee estate planning.

As a result, many Tennessee couples can focus heavily on:

• federal estate tax;
• capital-gains tax;
• asset protection;
• creditor exposure;
• remarriage;
• blended-family concerns;
• beneficiary protection; and
• long-term control.

That is very different from planning in a state imposing its own substantial estate tax.

What About a Traditional A/B Trust?

Older estate plans frequently contain an A/B Trust structure.

When the first spouse dies, the trust divides.

The “A” share might be the Marital Trust.

The “B” share might be the Credit Shelter Trust.

Tennessee estate-planning materials continue to recognize marital and credit-shelter trusts as common A/B structures, while noting that portability has reduced the necessity of Credit Shelter Trusts in some plans.

Historically, this made tremendous sense.

The goal was often to make sure the first spouse’s estate-tax exemption wasn’t wasted.

But portability and today’s much larger federal exemption have changed the equation.

An automatic formula written decades ago can potentially produce a result the couple never contemplated.

Consider an Older Formula Clause

Imagine a trust signed years ago saying:

At my death, fund the Credit Shelter Trust with the maximum amount that can pass without federal estate tax.

That may have meant $1 million when the document was drafted.

In 2026, the federal exemption is $15 million.

That’s a dramatically different result.

A couple could theoretically discover that almost the entire deceased spouse’s estate goes into an irrevocable Credit Shelter Trust because that’s what an old formula requires.

The document may technically be working exactly as written.

The problem is that the tax law changed around it.

Which Plan Is Better for a $3 Million Tennessee Couple?

Suppose a married couple owns:

• $800,000 residence;
• $1.2 million brokerage account;
• $700,000 retirement assets; and
• $300,000 other property.

Total:

$3 million.

Assuming no extraordinary circumstances, federal estate tax is unlikely to be the primary concern.

A mandatory Credit Shelter Trust solely for estate-tax planning may add complexity without producing meaningful estate-tax savings.

A marital share structure—or even simpler planning depending on the family’s circumstances—may deserve consideration.

Basis planning could potentially be more important than estate-tax exclusion.

What About a $20 Million Couple?

Now suppose the couple owns:

• $5 million business;
• $7 million investments;
• $4 million real estate;
• $3 million retirement accounts; and
• $1 million other assets.

Total:

$20 million.

Now the analysis becomes considerably more complicated.

They remain below the combined exemptions potentially available to a married couple, but:

• assets could appreciate;
• tax laws could change;
• one spouse could live another 30 years;
• the business could multiply in value; and
• portability has limitations.

A Credit Shelter Trust may therefore become much more attractive.

What About a $40 Million Couple?

At $40 million, estate-tax planning becomes impossible to ignore.

A Credit Shelter Trust can become an important part of a broader strategy.

But even then, the answer doesn’t necessarily have to be:

Everything into the Credit Shelter Trust.

The estate plan might use combinations of:

• Credit Shelter Trusts;
• marital/QTIP trusts;
• portability;
• lifetime gifting;
• irrevocable trusts;
• generation-skipping planning; and
• charitable strategies.

The appropriate division depends upon the family’s assets and objectives.

Flexibility May Be Better Than Predicting the Future

Nobody knows what the estate-tax exemption will be when a 55-year-old Tennessee resident dies.

Nobody knows what the couple’s assets will be worth.

And nobody knows what capital-gains rates will look like.

That makes flexibility extraordinarily valuable.

Modern estate plans may use techniques that permit decisions to be made after the first spouse’s death, when the family actually knows:

• asset values;
• applicable tax exemptions;
• tax rates;
• beneficiaries’ circumstances;
• the surviving spouse’s health;
• applicable law; and
• whether estate tax is genuinely a concern.

One example is QTIP planning.

The IRS permits a QTIP election for all or a fractional or percentage portion of qualifying property, providing post-death tax-planning flexibility when the governing instrument is appropriately drafted.

That can be much more attractive than trying to predict decades in advance exactly how much should go into each trust.

The Real Question Isn’t “Which Trust Is Better?”

Neither trust is universally better.

The question is:

What tax result and family result are we trying to create?

A Credit Shelter Trust says, in effect:

“I want these assets and their future appreciation potentially outside my surviving spouse’s taxable estate.”

A marital/QTIP structure says:

“I want to defer estate taxation at the first death, provide for my spouse, control the ultimate beneficiaries, and generally accept estate inclusion at the survivor’s death.”

Those are different strategies.

When a Credit Shelter Trust May Make More Sense

A Tennessee family may lean toward Credit Shelter planning when:

• the estate is large;
• significant appreciation is expected;
• the family owns a rapidly growing business;
• federal estate-tax exposure is realistic;
• future appreciation could push the estate above the exemption;
• preserving the deceased spouse’s exemption is important;
• generation-skipping planning is involved; or
• keeping assets outside the survivor’s taxable estate is a priority.

When a Marital Share Plan May Make More Sense

A marital share approach may be particularly attractive when:

• the estate is well below the federal exemption;
• estate-tax exposure is unlikely;
• obtaining another basis adjustment is important;
• assets have significant appreciation potential;
• the family still wants trust protection for the survivor;
• the deceased spouse wants to control the ultimate beneficiaries;
• there are children from a prior relationship; or
• flexibility is more valuable than automatically funding a Credit Shelter Trust.

What About Using Both?

For many families, that may be the better question.

Estate planning does not have to be all-or-nothing.

A plan might allocate some assets to a Credit Shelter Trust and other assets to a marital trust.

For example:

$5 million → Credit Shelter Trust

$5 million → Marital/QTIP Trust

Now the family potentially receives advantages from both strategies.

The Credit Shelter Trust can shelter future appreciation.

The marital trust can potentially receive another basis adjustment when the surviving spouse dies.

The optimal allocation can depend heavily upon the types of assets involved.

Asset Selection Matters Too

Not every asset necessarily belongs in the same trust.

Suppose the estate includes:

Asset A: Municipal bonds expected to appreciate very little.

Asset B: Stock in a rapidly growing private company.

If estate-tax exclusion is the goal, which asset would you rather place into the Credit Shelter Trust?

Potentially Asset B.

Why?

Because future appreciation can occur outside the surviving spouse’s estate.

But basis considerations may push in the opposite direction.

Assets with substantial unrealized capital gain may benefit from inclusion in the surviving spouse’s estate if another basis adjustment is expected.

That means sophisticated planning doesn’t merely ask:

“How much goes into each trust?”

It also asks:

“Which assets go into each trust?”

Don’t Forget Administration

There is another practical issue.

A Credit Shelter Trust doesn’t disappear after it is created.

It may require:

• separate accounts;
• trust accounting;
• tax returns;
• investment management;
• trustee administration;
• recordkeeping; and
• compliance with distribution provisions.

Those burdens may be worthwhile for a $30 million estate.

They may be considerably harder to justify for a $1.5 million estate when the only reason the trust exists is an outdated tax formula.

Complexity should produce a benefit.

Tennessee Couples Should Review Older Estate Plans

If your Tennessee estate plan contains terms such as:

Credit Shelter Trust

Family Trust

Bypass Trust

B Trust

Marital Trust

QTIP Trust

A/B Trust

or

maximum amount that can pass free of estate tax

it may be worth reviewing the document.

That doesn’t mean the plan is wrong.

It means the assumptions underlying the plan may have changed.

A trust drafted when the federal estate-tax exemption was $1 million was designed for a very different tax environment than one operating under a $15 million exemption.

The Bottom Line

For Tennessee married couples in 2026, the traditional Credit Shelter Trust is no longer automatically the obvious choice.

The enormous federal estate-tax exemption, portability and Tennessee’s elimination of its inheritance tax have changed the analysis.

For some families, a Marital Share Plan can provide an appealing combination of surviving-spouse protection, control over the ultimate beneficiaries and potentially valuable basis planning.

For others—particularly families with substantial or rapidly appreciating wealth—the Credit Shelter Trust remains an extremely powerful tool because assets and their subsequent appreciation can potentially remain outside the surviving spouse’s taxable estate.

And for still others, the best answer may be both.

The modern estate-planning question therefore isn’t:

“Should we use a Credit Shelter Trust or a Marital Trust?”

It is:

“How much should go into each structure, which assets should fund each share, and how much flexibility should we preserve until the first spouse actually dies?”

That analysis requires looking beyond the size of the estate today.

It requires considering what the assets might be worth decades from now, whether the family is more likely to face estate tax or capital-gains tax, whether there are children from prior relationships, how much control the first spouse wants to preserve, and how much administrative complexity the family is willing to accept.

For Tennessee families, the goal should not be to use the most complicated trust.

It should be to create the structure that produces the best result for the surviving spouse, the beneficiaries—and the family’s overall tax picture.

This article is for general educational purposes only and does not constitute legal or tax advice. Credit shelter, marital deduction and QTIP planning involve complex federal tax rules, and the appropriate structure depends upon the trust language, citizenship of the spouses, asset ownership, family circumstances and applicable law. Individuals should consult qualified estate-planning and tax professionals regarding their particular circumstances.