Disclaimer trust refers to a type of trust used by spouses to limit estate taxes. Spouses can agree to move assets the other spouse will receive upon their death into an irrevocable trust in their wills. This only occurs if the spouse chooses not to inherit the assets outright. A spouse can just receive the assets directly and pay the subsequent estate taxes, or the spouse can disclaim the assets, in which case the deceased spouse’s will directs them into a disclaimer trust and avoids estate taxes for the surviving spouse. The surviving spouse still benefits from the assets, but they will be limited to the terms of the trust. A spouse may also choose to use a disclaimer trust because they may keep assets away from creditors, later spouses should the survivor get remarried, or ensure children receive the assets from the trust after the surviving spouse passes.
See also: Bypass Trust
[Last updated in January of 2022 by the Wex Definitions Team]
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