A disclaimer will is a unique type of will that may offer some tax advantages to the surviving spouse of a testator (i.e., the person creating a will).
Basically, the way this will works is that one spouse will transfer 100% of their assets to their spouse in the will. The surviving spouse will then “disclaim” (i.e., a written refusal) any property or assets that they do not wish to inherit. This action can result in a more efficient distribution of the property, as well as provides significant estate tax reductions.
As such, a disclaimer will is generally praised for being a flexible method to use for distributing property to a spouse and other surviving beneficiaries. Oftentimes, a testator will not exactly know how their property should be distributed in the future, say 5 to 10 years down the line.
Thus, drafting a disclaimer will places some of this decision-making responsibility into the hands of the surviving spouse, who is usually a more trustworthy representative of the person than most other people.
Why Are Disclaimers Used?
As previously mentioned, a disclaimer is generally used when a person does not want to inherit or accept a gift that was given to them through a will.
The reason as to why many people use disclaimers is because they do not want their estate to end up having to pay additional federal taxes when they die due to the increase in their estate’s value. By disclaiming the gift or inheritance that would increase their estate’s value, they shift the tax liability to the next or alternate person named in the will.
What Are Some Requirements of a Disclaimer Will?
There are several requirements for drafting a disclaimer will. In order for it to be valid and legally enforceable, a disclaimer will must be in a writing that clearly indicates their refusal to accept the property interest. This writing must also be delivered to the executor or administrator of the testator’s estate within nine months from their date of death.
Additionally, the person signing the disclaimer must not have accepted any parts of the asset or any benefits from it, such as rent, dividends, or interest.
Lastly, the person signing the disclaimer cannot instruct the interest in the property to be given to another recipient. They must simply refuse it and let the executor or the testator’s legal representatives handle the rest of the process.
How Much Time Does a Surviving Spouse Have to Make a Disclaimer?
In most cases, the testator’s surviving spouse has nine months to complete the disclaiming process.
During this time period, the surviving spouse must go through their deceased spouses’ estate. They must identify which items they would prefer to inherit, and which items should be distributed to other people through the proper legal channels (e.g., succession and inheritance laws).
Of course, this can be a complex and tedious task to accomplish. Most of the time, however, it is worth the effort because the surviving spouse might not actually need to assume ownership of every single item included in the estate. This process also gives them the advantage of hindsight since the estate gets a “once-over” after the person has become deceased.
Also, some provisions in the person’s will may have become outdated over time. A disclaimer will can help the surviving spouse deal with any unanticipated changes that may have happened since the testator’s death.
Once the disclaimers are made, the remaining property is typically placed in a trust for later use or to be administered for the benefit of a named person (e.g., a child of the couple or a close relative). After the surviving spouse dies, their property may then be bequeathed to the children of the couple in accordance with the controlling state laws.
Are There Any Drawbacks to Disclaimer Wills?
Disclaimer wills are not suited for everyone or every situation. One major concern is that the surviving spouse may not be in the best position to manage an entire estate; both physically and mentally speaking, especially if the couple is already well advanced in their years.
For example, if the surviving spouse becomes incapacitated or no longer has the mental capacity to make sound legal decisions, then some other procedure will need to be done in order for the estate to be distributed correctly.
Therefore, it is usually necessary to appoint a back-up or alternate representative to manage the estate if something should happen to the surviving spouse. If no acceptable alternative representative is found, then the property may need to be distributed through the state probate process, which can often yield inefficient results.
Do I Need to Hire a Lawyer for Help With Drafting a Disclaimer Will?
Disclaimer wills are most effective when they are drafted, reviewed, and edited with the help of an attorney. If you and your spouse need to or are interested in learning more about the ins and outs of disclaimer wills, then you should consider consulting a qualified estate lawyer.
Also, in the event of a will dispute or a property contest, you may need to hire a lawyer near you for representation in a court of law.