Section 25 Planning Alternatives

• Library: Trust and Estate Legislation 2012

The first alternative to full-blown marital formula planning that can be inserted in a joint tax planning trust is to direct that, upon the death of the first spouse, all assets of that spouse’s separate share of a joint trust are either distributed to the surviving spouse or pass to a trust that qualifies for the federal estate tax marital deduction as QTIP (qualified terminable interest property). But these distributions are expressly conditioned on the right of the spouse to disclaim the distribution to the spouse or the marital trust. To the extent that the surviving spouse disclaims assets, those assets pass to a contingent credit shelter trust. The one limitation is that the spouse cannot have any power of appointment over the assets in the credit shelter trust for there to be a valid disclaimer. Therefore, the decision as to whether or not to fund the credit shelter trust...