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

[Laura Latta]

I haven't used limited powers of appointment with a disclaimer trust, so I
haven't researched this specific issue in depth. I did however, do a
cursory review of the disclaimer rules with this question in mind because I
am curious about the answer.

 I assume the issue is not the impact of the power of appointment on the
effectiveness of the trust to shelter the assets, but rather the
effectiveness of the disclaimer itself.

IRC  26 U.S.C. § 2518 and RCW 11.86 have different rules for disclaimers. A
quick read on their face suggests that the limited power of appointment
might pass muster under the RCW because it does not contain the IRC's
express language prohibiting the person disclaiming the property from
directing who receives it. However, the RCW does say that, unless the
disclaimer states otherwise, it will be deemed to disclaim all interests
necessary to make a qualified disclaimer under the IRC. That might mean the
power of appointment is disclaimed unless expressly retained.

I  would be interested in hearing what others think or know from their own
research.

On Thu, Jul 9, 2026 at 10:57 AM David Faber <david at faberfeinson.com> wrote:

> 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.***
> ***Disclaimer: Please note that RPPT listserv participation is not
> restricted to practicing attorneys and may include non-practicing
> attorneys, law students, professionals working in related fields, and
> others.***
> _______________________________________________
> WSBAPT mailing list
> WSBAPT at lists.wsbarppt.com
> http://mailman.fsr.com/mailman/listinfo/wsbapt
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://mailman.fsr.com/pipermail/wsbapt/attachments/20260715/766af510/attachment.html>