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.
Investopedia explains '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.