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TAX / PERSONAL FINANCIAL PLANNING

The unlimited marital Another observation
Many married taxpayers will wind up choosing the
deduction for assets that marital disclaimer trust because of its flexibility
and the ability of a surviving spouse to decide,
later, if a trust will be needed to serve the family’s
go to a surviving spouse best interests. If they decide on this type of trust,
however, they should be aware that when disclaim-
ing assets in an estate, there are certain rules to
merely defers estate taxes, follow to minimize federal estate or gift taxes. These
rules are set forth in Regs. Sec. 25.2518-2 and
should be discussed with a tax professional. First
it doesn’t avoid them. and foremost, a disclaimer by the surviving spouse
must be irrevocable and unqualified. And, in general
terms, the other key requirements are:
■ The disclaimer must be in writing;
when more information is available, before having to ■ The writing must be delivered to the appropriate
choose between: representative within nine months of the date
1. A bypass trust plan; on which the transfer creating the interest in the
2. Portability; or disclaimant is made;
3. Simply having all assets pass directly to the surviv- ■ The disclaiming party (surviving spouse) must
ing spouse. not have accepted the property interest that is
Put another way, some married taxpayers might being disclaimed or any of its benefits; and
prefer to delay choosing among these options, reason- ■ The deceased spouse’s will must contain provi-
ing that a high estate tax exemption would make the sions for the marital disclaimer trust.
need for trusts unnecessary. Failure to meet all the requirements for a
For clients such as these, a marital disclaimer trust disclaimer could have unfavorable tax consequences.
could be a top choice because of the flexibility that it A nonqualified disclaimer could cause the surviving
provides. Most important, a disclaimer trust strategy will spouse to be deemed to be the party making the
give the surviving spouse the ability to wait for a better transfer, by way of gifts, to the successor donees.
time to decide if it would be advantageous to disclaim This would not only upset the trust strategy plan,
asset ownership and permit the implementation of a but it would also lead to gift tax reporting and
trust. Assets in a disclaimer trust are typically held sepa- requirements to file Form 709, United States Gift
rate and apart from the surviving spouse’s estate. And, as (and Generation-Skipping Transfer) Tax Return.
with a regular bypass trust, any remaining assets and any
increase in their value after the first spouse’s death will FINAL THOUGHTS
pass tax-free to the remaining beneficiaries. This article has focused on certain important estate
As with a regular bypass trust, a marital disclaimer planning concepts. Besides the trusts discussed
trust also makes it possible to achieve major tax savings above, a variety of other strategies can be used by
by ensuring the maximum benefits of both lifetime married couples, too, of course. Because of the
exemptions. But, unlike the regular bypass trust, fund- uncertainties that lie ahead involving potential
ing does not require a preset formula or dollar amount. changes to the tax code, married taxpayers should
seek professional guidance before choosing an
Choosing between a traditional bypass trust and a estate planning alternative. More than ever, they
marital disclaimer trust need to be made aware of the potential risks and
Despite the popularity of the marital disclaimer trust, rewards — whether these involve federal estate
many will argue in favor of the regular bypass trust tax or capital gains tax — that come with various
because of the added control that the first spouse has planning strategies. ■
over the assets and their ultimate distribution to the
designated beneficiaries.

26 | Journal of Accountancy March 2022