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Saying ‘no thanks’ to an inheritance

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in Small Business Tax

Q. Recently, you suggested disclaiming an inheritance to save estate tax. Couldn’t you just set up a credit shelter trust? — R.M., via e-mail

Not exactly. A credit shelter trust is an effective tool that may be used by the owner of substantial assets. However, in this case, we were referring to an inheritor receiving assets above the estate-tax exemption amount. With a disclaimer, the assets bypass the inheritor altogether in order to maximize amounts passing tax-free to other heirs.

An inheritor may use a credit shelter trust in conjunction with the exemption for his or her own children.

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