[WSBAPT] Disclaimer trusts

Thu Feb 27 16:28:57 PST 2014

Yes. But see Michal Winslow’s comments. It is good to make mention of the
ability to disclaim in the CPA as well as the allocation of disclaimed
property in the will, so there’s no confusion. 

(Since a qualified disclaimer for federal tax purposes must be made within
9 months of the date of creation of the interest, there was some
discussion at one time about whether the creation of a survivorship
interest in a CPA occurred at the date the CPA was created. This concern
was directly addressed at to joint property (including joint bank accounts
with rights of survivorship) by the flush language at the end of
11.86.011, and generally as to CPAs in that section at (7)(b).  Of course,
a CPA which converts all property now owned or hereafter acquired into
community property would be effective on the date of creation or
acquisition as to a ½ interest. For example, if one spouse inherits
property, such an agreement would convert that into community property as
of the date of death in respect of inherited real property, and a
disclaimer by the other spouse, if desired, would have to be made by the
non-inheriting spouse in compliance with that time frame. Some
practitioners postpone conversion into community property until death, but
more for reasons of protecting an inheritance in the event of divorce.
There is also a concern by some that conversion of separate property to
community property at death will preclude the IRC Sec. 1014(b)(6)
adjustment to basis on both halves of community property where the
non-owning spouse dies first, by reason of 1014(e), looking on the
conversion as a gift. I do not subscribe to this theory for two reasons:
first, a CPA is a reciprocal contractual arrangement rather than a gift;
second, (b)(6) does not make an exception for conversions to community
property within one year of death and, being specific as to community
property as defined by state law, would prevail over (e). But, hey, I may
be mistaken. I never ran across any rulings one way or the other.) 

S 

From: wsbapt-owner at lists.wsbarppt.com
[mailto:wsbapt-owner at lists.wsbarppt.com] On Behalf Of Guardhi at aol.com
Sent: Thursday, February 27, 2014 3:41 PM
To: wsbapt at lists.wsbarppt.com
Subject: Re: [WSBAPT] Disclaimer trusts

Sorry for the confusion.  I want my client to have a CPA and a disclaimer
trust in their wills.  It would seem if it was a will with a mandatory CST
and a CPA there would be a conflict. But can we have a CPA and a will with
a disclaimer CST in it and then choose which one we want to use at the
time of the first death?

In a message dated 2/27/2014 3:02:42 P.M. Pacific Standard Time,
sam at furgasons.com writes:

See also, RCW11.86.011(2)(n); 11.86.051(2).

S 

NOTE: Kenyon, I don’t understand your question. As I read it, you are
asking if, in the situation where a community property agreement transfers
everything to a surviving spouse, and the surviving spouse chooses to
accept everything pursuant to the terms of the CPA, (i.e., “chooses not to
exercise the disclaimer”) can assets be placed into a testamentary trust
in a will which will not be taxable in the surviving spouse’s estate. I
would respond that if the surviving spouse fails to make a timely
disclaimer, the decedent’s estate will have no assets with which to fund a
testamentary trust (absent separate property and no conversion provision
in the CPA, in which case the separate property would be subject to
probate and the surviving spouse could disclaim that property, which could
then flow to a bypass trust). A will with a disclaimer funded trust
normally leaves everything to the surviving spouse, and the trust is only
funded if the survivor disclaims, so there’s no problem with that,
although the surviving spouse would have to disclaim property passing both
under the CPA and under the will. 

From: wsbapt-owner at lists.wsbarppt.com
[mailto:wsbapt-owner at lists.wsbarppt.com] On Behalf Of Mike Winslow
Sent: Thursday, February 27, 2014 2:10 PM
To: wsbapt at lists.wsbarppt.com
Subject: RE: [WSBAPT] Disclaimer trusts

The CPA is typically drafted to allow disclaimer. Specific provisions are
included in the CPA to allow this.

The trust provisions of the will provide for funding the trust if the
spouse disclaims. This gives the planner options when the first spouse
dies, but avoids mandatory funding of a Credit Shelter trust, depending on
whether the exemption of the first spouse needs to be used to avoid tax
when the second spouse dies.

There are varying philosophies on the approach to this, as some planners
believe the funding of the trust should be mandatory, instead of optional.

Michael A. Winslow

1204 Cleveland Ave.

Mount Vernon, WA 98273

Ph. 360-336-3321

Em. Mike at winslegal.com

This message is from an attorney, so it’s confidential. If you are not the
intended recipient, it’s too late to stop reading this message, but you
may not use it for any improper purpose. Huge Disclaimer available upon
request.

From: wsbapt-owner at lists.wsbarppt.com
[mailto:wsbapt-owner at lists.wsbarppt.com] On Behalf Of Guardhi at aol.com
Sent: Thursday, February 27, 2014 2:02 PM
To: wsbapt at listserv.nethelps.com
Subject: [WSBAPT] Disclaimer trusts

Q;  Can a testamentary disclaimer credit shelter trust be used in
conjunction with a community property agreement, if the surviving spouse
chooses not to exercise the disclaimer as the estate is not taxable?

Kenyon Luce

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Bar Association nor its officers or agents. 

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