Contents

ESTATE AND GIFT TAX CONSIDERATIONSin the event the surviving spouse decides to disclaim any of the assets thatwould otherwise be distributed to the surviving spouse, the disclaimed assetswill be set aside by the trustee in another trust share, for example, Trust B. Anyassets that are disclaimed and added to Trust B will still be held for the benefit ofthe surviving spouse. The surviving spouse will receive the net income of TrustB and trustee-approved distributions of principal for the surviving spouse’shealth, education, maintenance, and support. The surviving spouse will not,however, have the ability to withdraw the assets from Trust B and, therefore, willbe more restricted with respect to any assets disclaimed and added to Trust B.The reason the surviving spouse will disclaim some of the assets and allowthem to pass to Trust B is to make certain that the applicable exclusion amount 186of the first spouse to die is used (not wasted). The surviving spouse’s decision tomake a disclaimer will depend on the facts and circumstances that exist at the timeof the death of the first spouse to die, the primary one likely being the size of theestate. Again, the balance of the assets transferred can be protected by the maritaldeduction. 187 Consequently, the disclaimer trust provisions offer the survivingspouse flexibility to determine whether and to what extent Trust B will be funded.At the death of the surviving spouse, any remaining assets (after payment oftaxes and expenses) would be divided into appropriate shares to provide fortransfer to any children and/or to others. These shares would be transferred freeof trust, except to the extent the trust instrument limits distributions to beneficiarieswho are minors.(i) Last WillIn addition to a trust, a last will and testament should be prepared. One purposeof a will is to provide for distribution of the individual’s tangible personal propertyat death. Usually, these items, or at least most of them, will be transferred tothe surviving spouse. Otherwise, this property can be distributed by way of awritten list, which designates which beneficiaries are to receive which items oftangible personal property.Another purpose of a will is to provide that, at death, any property (otherthan tangible personal property) the individual owns in his or her name—that is,that has not been transferred to a trust prior to death or is not owned in joint tenancyor the like—will pour over into the trust after it passes through probate. Apourover will ensures that any property that the individual has not placed in atrust during his or her lifetime will ultimately end up in, and be subject to thedispositive provisions of, the trust.A will also designates the personal representative of the estate (also known asthe executor or executrix). This person administers the probate estate and workswith the probate court to properly distribute assets to heirs. If probate isavoided, by transferring property to a trust or owning it in joint tenancy or thelike, there will be no probate estate and the personal representative will not haveany function.186 See § 8.4.187 See § 8.6(e). 254