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If you disclaim the property, generally it will pass to your heirs as if you had died without a last will and testament. Your heirs will be your children and descendants, and if you have no children, your heirs will be other relatives. In this situation, the person who disclaims is in control by re-directing the property to the disclaiming person's heirs.

Disclaimed property can also be controlled by the person who originally owned it (instead of by the persons who would have received it). You can provide in your last will (or living trust) what will happen to property if any of your beneficiaries use this disclaimer technique. This allows you (not the person who would have received the property) to control where the property goes.? Specifically, you can provide that if your spouse disclaims any property, the disclaimed property will pass into a disclaimer trust. The disclaimer trust can then have the same type of provisions as the credit trust. That is, distributions can be made from the trust for the support of the spouse, and at the spouse's death, final distributions can be made to your other beneficiaries.

There are important differences between credit trusts and disclaimer trusts. The credit trust approach is conservative and ensures that the federal exclusion of the spouse who dies first is used to the greatest extent possible. The disclaimer trust approach places the decision of how much to put into the trust in the hands of the surviving spouse. However, it also leaves open the possibility that the surviving spouse will make a decision that may waste some of the exclusion amount.

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This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.

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