[WSBAPT] Disclaimer Credit Shelter Trust & Limited Power of Appointment re WA Estate Tax Law

[David Faber]

Hi all,

I have a married couple who want to set up a credit shelter trust funded by
disclaimer (they want the flexibility at the first death to determine
whether the credit shelter trust is worth their efforts to fund and
administer) and they want to retain a limited power of appointment to vary
the dispositive provisions for their children at the time of death of the
surviving spouse. A few questions:

(1) Is it accurate that the IRS will treat the assets in a disclaimer trust
with *any* power of appointment as included assets in the surviving
spouse's estate (setting aside portability)? Obviously a general power of
appointment should work this way, but why for a limited/special power?

(2) Does WA DOR also treat any (general or limited) power of appointment as
a disqualifying estate tax planning tool when the trust was funded by
disclaimer? Can you point me to the authority for that?

(3) If indeed the DOR (and IRS) disallows limited powers of appointment in
a disclaimer trust for estate tax planning purposes, is there any way to
have the credit shelter trust funding mechanism remain flexible while also
giving the surviving spouse beneficiary any flexibility to control the
inheritance mechanism at the surviving spouse's death?

Thank you!

Best,
David J. Faber
Faber Feinson PLLC
800 Polk Street, Suite B
Port Townsend, WA 98368
(360) 379-4110

*** NOTICE: ATTORNEY CLIENT COMMUNICATION - PRIVILEGED & CONFIDENTIAL.
This communication may contain privileged or other confidential
information. If you are not the intended recipient, or believe that
you have received this communication in error, please do not print,
copy, retransmit, disseminate, or otherwise use the information. Also,
please indicate to the sender that you have received this communication in
error, and destroy the copy you received.***
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://mailman.fsr.com/pipermail/wsbapt/attachments/20260709/c0d8f83e/attachment.html>