Marital Disclaimer Trusts: An Option to Avoid Estate Taxes

Planning to pass on your hard-earned assets to your loved ones is a heartwarming endeavor. You want to ensure that your family’s future is secure and that they inherit the wealth you’ve worked diligently to accumulate. However, the looming shadow of estate taxes can turn this blessing into a burden without the benefit of a disclaimer trust as part of your estate plan.

Florida residents, like many others, often face the challenge of minimizing estate taxes to ensure their heirs receive the maximum benefit. One solution that offers considerable advantages is the Marital Disclaimer Trust. At the Law Offices of John Mangan, P.A., we specialize in helping clients establish these trusts and navigating the intricacies of estate planning in Florida.

What is a Marital Disclaimer Trust?

A Marital Disclaimer Trust, also known as a Qualified Disclaimer Trust, is a strategic estate planning tool designed to mitigate the impact of estate taxes while safeguarding the financial security of your surviving spouse. It involves the creation of a trust that allows the surviving spouse to disclaim or refuse a portion of the deceased spouse’s assets. By disclaiming these assets, they are then transferred into a Family Trust a/k/a Disclaimer Trust, thus potentially reducing the overall taxable estate.

How Does a Disclaimer Trust Work?

Let’s illustrate the process with an example. Imagine a married couple, Sarah and David, with an estate valued at $15 million. Sarah passes away, leaving her entire estate to David. Since the current estate tax exemption is at $13.62 million, the estate is nearly $1 million over this exemption rate. Without proper planning, their estate would be subject to significant estate taxes upon David’s passing, potentially reducing the inheritance for their heirs.

However, Sarah and David have a Marital Disclaimer Trust in place. When Sarah passes away, David has the option to disclaim a portion of her assets. Let’s say he disclaims $5 million. This $5 million is then transferred into the Marital Disclaimer Trust. Since the assets in the trust are not considered part of David’s taxable estate, they are shielded from estate taxes. This strategic move could save their family a significant amount in estate taxes, ensuring a more substantial inheritance for their heirs.

Advantages of a Disclaimer Trust

Estate Tax Reduction:

One of the primary advantages is the potential reduction of estate taxes, preserving more wealth for your heirs.

Flexibility:

Disclaimer trusts offer flexibility as the surviving spouse can decide the amount to disclaim based on the current tax laws and the family’s financial circumstances.

Creditor Protection:

Assets in the trust may be shielded from creditors, providing an added layer of protection.

Control:

The surviving spouse may be named as Trustee, ensuring wishes are honored.

Utilizing a Power of Attorney for Executing a Disclaimer:

In situations where one spouse is apprehensive about the surviving spouse’s capability to execute a disclaimer correctly, they can opt to have it carried out by the designated Power of Attorney agent.

Disadvantages of a Disclaimer Trust

Loss of Control:

Once assets are disclaimed and placed in the trust, you may lose direct control over them (but this can be customized to your wishes).

Complexity:

Disclaimer trusts can be intricate, requiring careful planning and legal expertise.

Surviving Spouse’s Consent:

The surviving spouse must act to disclaim assets, which may not always align with their financial needs or goals.

Is a Disclaimer Trust Right for You?

Determining if a Disclaimer Trust is suitable for your estate plan depends on various factors, including your financial situation, goals, and family dynamics. Another thing you should consider is the estate tax exemption. In 2026, the estate tax exemption will be reduced to a projected inflation-adjusted amount of approximately $6.5 million, which means that many more households will be subjected to it. To make an informed decision, it’s crucial to consult with experienced estate planning professionals who understand the nuances of Florida’s estate tax laws.

Law Offices of John Mangan, PA
Palm City – Stuart, FL
CALL: 1 (772) 218-0480

Do you question the need for attorney guidance with so many online resources? Because laws and regulations are complex, and because every person has a lot at risk, more people than ever are seeking professional guidance from an experienced, knowledgeable source. That helps explain the rapid growth of our firm. Whether you happened upon this website by accident or are one of the many referrals we receive from a nearly 15-year collection of satisfied clients, our staff can provide customized estate planning guidance for you. Call us. Our number: 1 (772) 218-0480

Written by: John Mangan, JD, MBA