A Clayton election is a type of election that can occur in a trust. Specifically, it refers to an election made by the surviving spouse of a deceased person who had created a trust that included a marital deduction. The marital deduction allows the deceased person's estate to pass to their spouse tax-free.
A Clayton election allows the surviving spouse to give up their right to receive assets from the deceased person's estate in exchange for receiving an income stream from the trust during their lifetime. This can be useful if the estate is large enough to trigger estate taxes and the surviving spouse wants to reduce the overall tax burden on the estate.
By making a Clayton election, the surviving spouse can receive an income stream from the trust without triggering estate taxes, which would otherwise be due on the assets they would have inherited from the deceased person's estate. The income stream can provide the surviving spouse with financial security while preserving more of the estate for future generations.