Which funding method funds the credit shelter first, and the remaining assets go into the marital trust?

• A. Pecuniary share
• B. Fractional share formula
• C. Reverse marital formula
• D. Up-front marital formula

Answer: (D)

This question tests how a first-death funding formula allocates assets between a credit shelter (bypass) trust and the marital trust. The up-front marital formula funds the credit shelter first, using assets up to the first spouse’s unused estate tax exemption, and then places the remaining assets into the marital trust for the surviving spouse.

Why this is best: by funding the credit shelter first, you lock in the deceased spouse’s available exemption into the bypass trust, preserving it from estate tax at the survivor’s death. The rest goes to the marital trust, allowing the surviving spouse to benefit while still benefiting from the surviving spouse’s own exemption later. This sequencing contrasts with other methods that either allocate a fixed dollar amount or a fraction of assets to the credit shelter (which may not fully utilize the exemption) or fund the marital trust first and leave the credit shelter to whatever is left.