DEFINITION of 'Disclaimer Trust'

A trust that has embedded provisions (usually contained in a will) which allow a surviving spouse to put specific assets under the trust by disclaiming ownership of a portion of the estate. Disclaimed property interests are transferred to the trust, without being taxed.

Provisions can be written into the trust that provide for regular payouts from the trust to support survivors. Surviving minor children can also be provided for, as long as the surviving spouse elects to disclaim inherited assets, passing them on to the trust.

BREAKING DOWN 'Disclaimer Trust'

For example, if an individual passes away and leaves her husband an estate, he may disclaim some interests in the estate, which are then passed directly to the trust as though it were the original beneficiary. Minor children could then benefit from regular payouts from the trust.

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. In the above example, if the surviving spouse does not disclaim ownership of any portion of the estate, then the deceased's wish to transfer assets to the surviving minor children goes unfulfilled. Because of the legal complexities involved, these trusts should only be set up by qualified professionals.

RELATED TERMS
  1. A-B Trust

    A trust created by a married couple with the objective of minimizing ...
  2. Credit Shelter Trust - CST

    A type of trust that allows a married investor to avoid estate ...
  3. Qualified Disclaimer

    A refusal to accept property that meets with provisions set forth ...
  4. Marital Trust

    A fiduciary relationship between a trustor and trustee for the ...
  5. Trust Fund

    A trust fund is a fund comprised of a variety of assets intended ...
  6. Qualified Terminable Interest Property ...

    A type of trust that enables the grantor to provide for a surviving ...
Related Articles
  1. Retirement

    Estate Planning for Beginners, Part Four

    This is how disclaimer trusts work and when it makes sense to use them in an estate plan.
  2. Managing Wealth

    Refusing An Inheritance

    Contrary to popular belief, inheriting assets isn't always a good thing. Find out what to do if you want to disclaim them.
  3. Financial Advisor

    Disclaiming Inherited Plan Assets

    There are some good reasons for choosing not to accept the funds, but be sure you follow the proper process.
  4. Financial Advisor

    Should You Put Your Faith In A Trust?

    Many institutions want a piece of your portfolio, but trusts can provide a one-stop shop.
  5. Managing Wealth

    Surprising Uses for Trust Funds

    Here are five common situations where a trust fund makes financial sense.
  6. Retirement

    Estate Planning for Beginners, Part Five: Credit Shelter Trusts

    Credit shelter trusts provide these advantages in an estate plan.
  7. Managing Wealth

    Surprising Ways a Trust Could Help Your Family

    Everything you always wanted to know about setting up trusts, in handy glossary form.
  8. Retirement

    How To Set Up A Trust Fund In Australia

    No, they're not just for the super-rich. But you need to know the rules.
  9. Managing Wealth

    Pick The Perfect Trust

    Trusts are an estate plan's anchor, but the terminology can be confusing. We cut through the clutter.
  10. Financial Advisor

    How Trust Funds Can Safeguard Your Children

    Certain types of trust funds can help to protect your assets from bankruptcies and civil actions, and can be established to safeguard your children and designated beneficiaries.
Hot Definitions
  1. Debt Security

    Any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount ...
  2. Taxable Income

    Taxable income is described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments ...
  3. Chartered Financial Analyst - CFA

    A professional designation given by the CFA Institute (formerly AIMR) that measures the competence and integrity of financial ...
  4. Initial Coin Offering (ICO)

    An Initial Coin Offering (ICO) is an unregulated means by which funds are raised for a new cryptocurrency venture.
  5. The Bernie Madoff Story

    Bernie Madoff ran a multibillion-dollar Ponzi scheme that is considered the largest financial fraud of all time.
  6. Pyramid Scheme

    An illegal investment scam based on a hierarchical setup. New recruits make up the base of the pyramid and provide the funding, ...
Trading Center