By Adam J. Gottlieb
A stable married couple with no serious family
issues has several planning options when they consider the death of one or both
spouses. Upon the death of one spouse, a question arises as to how to provide
for the remaining life of the surviving spouse in a tax-advantaged way. I often consider seriously a disclaimer trust
in the deceased spouse's will, creating a degree of flexibility not found in
The disclaimer provisions allow the surviving spouse
to say he or she does not want some or all of the deceased spouse's
assets. Any disclaimed property passes
to a trust (the terms of which are also in the deceased spouse's will) for the
primary benefit of the surviving spouse.
To fund the disclaimer trust, the surviving spouse must, within nine
months after the death of the deceased spouse, affirmatively disclaim or
renounce his or her interest in some or all of the deceased spouse's assets,
pursuant to EPTL 2-1.11 and IRC § 2518.
This blog entry is not about exploring the many tax
planning options at the deceased spouse's death. It is about a practical issue associated with
the appointment of the trustee(s) of a disclaimer trust. The deceased spouse's will includes the
nominated trustee(s) of the disclaimer trust as well as the dispositive
provisions of the trust, all of which are invoked when, but not before, the
surviving spouse exercises his or her disclaimer.
Normally, in a Probate Petition, a will proponent
(usually a surviving spouse in our facts) requests that the will be admitted to
probate (i.e., request that the Surrogate's Court issue Letters Testamentary).
Letters Testamentary is a Surrogate's Court document that indicates that the
will is admitted to probate and that the nominated executor is appointed to
serve as executor. If the will has trust
provisions which are effective immediately (e.g., without requiring a
disclaimer), the will proponent can also request Letters of Trusteeship on that
Probate Petition. Letters of Trusteeship
is a Court document that indicates that the nominated trustee(s) is appointed
to serve as trustee(s). Assuming there are no objections, the Court may issue
both Letters Testamentary and Letters of Trusteeship simultaneously.
However, there is an issue which turns on whether
the trust language in the will has been invoked at the time of the request for
Letters of Trusteeship. With disclaimer
trust provisions in the will, when the Probate Petition is filed with the
Court, the disclaimer documents in most cases will not yet have been filed,
making the will provisions regarding the trust and the appointment of the
trustee(s) superfluous. In this event, the Court will not entertain the Letters
of Trusteeship portion of the Probate Petition.
The disclaimer provisions of the will become
effective only when the disclaimer documents have been timely filed with the
Court. Since the disclaimer documents
usually make reference to certain provisions of the will, the Court will then
need the will in order to understand the disclaimer documents. Only after the disclaimer is timely filed
will the Court entertain a Petition for Letters of Trusteeship. Once the Court issues Letters Testamentary
and the disclaimer is filed, the Court will require a separate Petition for
Letters of Trusteeship.
While the procedure seems unnecessarily cumbersome,
consider the possibility that the disclaimer may never be filed with the
Court. If the Court issues Letters of
Trusteeship before the disclaimer is filed, then the Court will have given
authority to the nominated trustee(s) over will provisions that have no legal
To summarize, the probate of a disclaimer will
should proceed in the following order of events: