Living Trusts in Santa Clarita

Disclaimer Trusts

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A "Disclaimer Trust" has special embedded tax provisions which allow a surviving spouse to put specific assets under the trust by disclaiming ownership of a portion of the estate upon the first death. Disclaimed property interests are transferred to the trust, without being taxed. It is kind of like an "AB" trust (two trusts are formed) except the surviving spouse has the option to create the second trust (the Disclaimer Trust) rather than it being mandatory like the traditional "AB" trust. Some married couples prefer this kind of flexibility. Not only is it a practical matter for them, but tax consequences are often unknown, so they like the flexibility.

Provisions can be written into the trust that provide for regular payouts from the trust to support survivors (usually the surviving spouse and in some cases, children of the marriage). Therefore, the surviving spouse doesn't have to live in the poor house. They can use assets from the Disclaimer Trust for certain purposes - usually for their health, education, support, etc.

Disclaimer trusts require that the survivor act according to the wishes of the deceased, and disclaim ownership of some of the assets bequeathed to him by the deceased. The assets in the Disclaimer Trust will ultimately end up with beneficiaries chosen before the first spouse died. Therefore, assets in the Disclaimer Trust are also protected when the surviving spouse meets the "new guy" or the "new gal" later on in life. That's another benefit that has nothing to do with taxes and everything to do with making sure the assets end up with the right people.

The two main benefits of "Disclaimer Trust" are similar to the popular "A/B Mandatory Split Trust" - namely, potential savings (or in some cases, elimination) of estate taxes, and preservation of assets for the beneficiaries.