Does Your Estate Plan Need a Disclaimer Provision? Make sure your family gets what it needs by including a disclaimer provision in your estate plan.

Disclaimer provisions inside estate plans are growing in popularity these days, and it's not difficult to see why. With the specifics of the federal estate tax changing almost every year between now and 2011 (and a number of states "decoupling" their own taxes from the federal system), it's never been more difficult to get a fix on the death tax.

A disclaimer provision written into a will allows a surviving spouse-who could inherit all the couple's assets tax-free, if he or she wanted-to give away, or "disclaim," a portion of that estate within nine months of the first spouse's death. This flexibility allows a couple to take advantage of the estate-tax exemption for both spouses, if needed. For business owners with significant assets, this is a key distinction.

There's nothing particularly new about the technique of putting some assets in a trust and passing others to the spouse at death. For decades, estate planners have used credit-shelter trusts, or bypass trusts, to do much the same thing. But with the federal and state estate-tax exemption amounts now shifting year by year, it's difficult for a credit-shelter trust to keep up with the times. You either need to rewrite your estate plan annually, or you need flexibility built into it.