Disclaimer provisions provide flexibility by giving the surviving spouse the option to shift assets in response to changing estate tax thresholds and household financial needs. Each spouse leaves his or her share of the estate completely to the surviving spouse. After the first spouse passes away, the surviving spouse holds the power to decide, within nine months after the death, whether the assets should be split. They are used as a standby device when there is little possibility that any estate tax will be due on the survivor’s death, even if all of the deceased spouse’s property passes to the survivor.
Your Spouse Still Gets the Benefits
The surviving spouse can fund the disclaimer trust with as many assets as makes sense in light of the federal estate tax structure and the value of assets remaining after the first death. The surviving spouse receives income from the disclaimer trust, cannot revoke it, has little or no power to change it, and has limited access to its principal. This separation of assets is necessary for the disclaimer trust to receive separate tax treatment from the survivor's own property.
Know What You Are Doing
Disclaimer trusts are a great option for most married couples but do come with a degree of risk. First, each spouse must fully trust that the property left to the survivor will not be squandered and in addition, tax planning must be proactively handled following the first death. Most surviving spouses have faith that the other will handle the finances appropriately and usually the survivor seeks the advice of an attorney immediately following the death of a spouse, so these risks are usually minimal. The simplicity and flexibility of a disclaimer trust makes it a good alternative for most married couples.
To learn more about your options call Lynn Girvin today. 949-387-8707