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A
disclaimer
Will is
a
useful estate
planning
tool
which
provides
flexibility
while
estate
tax laws
remain
in flux.
Typically
married
couples
want the
surviving
spouse
to have
as much
wealth
as he or
she
needs
throughout
his or
her
lifetime.
Most
Wills
direct
the
appointed
Executor
to
administer
the
terms of
the
Will,
terms
which
are set
in
stone.
Often
the Will
instructs
the
funding
of a
bypass
(or
credit
shelter
trust)
before
giving
the
balance
to the
surviving
spouse.
The
bypass
trust is
funded
with the
maximum
available
estate
tax
exemption
(currently
$2
million
rising
to $3.5
in
2009).
The
terms of
the
trust
are
usually
for the
benefit
of the
surviving
spouse
and/or
children
to be
paid
ultimately
to the
children
upon the
surviving
spouse's
death.
A
disclaimer
Will
does not
force
the
creation
of a
bypass
trust.
Rather,
it
leaves
the
entire
estate
to the
spouse
but
gives
the
spouse a
disclaimer
right
allowing
the
surviving
spouse
to elect
to
transfer
all or a
portion
of the
available
estate
tax
exemption
to fund
the
bypass
trust
after
the
death of
the
first
spouse
should
it makes
sense at
that
time.
Upon the
death of
the
first
spouse,
the
surviving
spouse
has 9
months
to
disclaim
a
portion
of the
estate.
Rising
lifetime
exemptions
mean
that
traditional
Wills
which
create
mandatory
bypass
trusts
are not
necessarily
what the
testator
would
have
wanted.
Currently,
the
estate
tax
exemption
is $2
million
dollars
(it used
to be
only
$600,000).
Suppose
husband
dies
with an
estate
worth
$2.5
million
dollars.
Under a
traditional
Will as
described
in the
first
paragraph,
$2
million
would be
held in
trust
for the
wife
during
her
lifetime
and she
would
receive
$500,000
outright.
The
husband
believed
the
trust
would be
funded
with
$600,000
(the
exemption
when the
Will was
drafted),and
that the
spouse
would
receive
$1.9
million.
A
disclaimer
Will
allows
the
surviving
spouse
to
decide
how much
of the
exemption
he or
she
wants to
use at
the time
of the
first
spouse's
death.
This is
often
more
practical
than
forcing
the full
exemption.
Assuming
rising
estate
tax
exemptions,
forcing
the use
of the
bypass
trust
may not
be what
the
decedent
would
have
wanted.
A
disclaimer
is also
a
flexible
way to
maneuver
around
the
state
estate
tax.
Many
states
have
de-coupled
from the
federal
estate
tax
system,
and
impose a
separate
estate
tax. For
example,
New
York's
exemption
remains
at
$1,000,000.
This
means
that
using
the
entire
federal
exemption
of $2
million
will
result
in a New
York
estate
tax of
$99,600
on the
additional
$1
million of
federal
exemption.
If the
spouse
decides
to use
only
$1,000,000
of
exemption,
the
state
estate
tax can
be
avoided.
Whether
a
disclaimer
Will is
right
for you
depends
on your
individual
facts
and
circumstances.
Questions?
If you
have any
questions
regarding
this
matter
or any
other
estate
planning
techniques,
please
contact
a
Maurice
Kassimir
&
Associates,
P.C.
Trusts &
Estates
attorney
or
e-mail
us:
sklawyers@skpclaw.com. |
