Which formula funds the marital trust and the credit shelter trust proportionally, allocating a portion of each asset to the marital trust in proportion to each trust's share of the total value?

• A. Up-front marital formula
• B. Reverse marital formula
• C. Fractional share formula
• D. Special needs trust

Answer: (C)

Proportional funding uses a fractional share formula to split each asset between the two trusts in the same ratio as the trusts’ overall shares of value. If the plan calls for, say, 60% to the marital trust and 40% to the credit shelter trust, every asset would be allocated 60% to the marital trust and 40% to the credit shelter trust. Done asset by asset, this ensures the trusts end up with the intended total percentages, regardless of the mix of assets. It also helps make full use of the deceased spouse’s estate tax exemption through the credit shelter trust while preserving the marital deduction.

Other methods don’t fund assets in that same pro rata way. An up-front marital formula sets a fixed amount to the marital trust first, which can misalign with asset values. A reverse marital formula allocates funding in the opposite order, not achieving proportional sharing across all assets. A special needs trust serves a different planning purpose entirely.