The relatively new tax law has created a great deal of confusion among estate planners. To adapt, one proposed strategy calls for the first spouse to die to leave almost everything to the surviving spouse, or to a trust where she’s the beneficiary.
Then the survivor can disclaim whatever amount is suitable, to the children, or to a trust for them. This approach lets the survivor consider the tax law in effect at the time of death, her financial situation, and other factors, then make an informed decision.
However, disclaimers are seldom used. The widow may be unwilling to give up part of her inheritance or may not be capable of understanding that disclaiming certain assets can lead to tax savings, when the time comes. As an alternative, you might have a “min-max plan.” That is, the first spouse to die might leave a certain amount to the children or a trust for the children, perhaps 20% or 25% of the estate.
Then you’ll know that at least some money will be out of the survivor’s taxable estate. The surviving spouse can be given the power to disclaim additional assets, to the children, up to the amount that will be exempt from estate tax.
