A disclaimer is an unconditional refusal to accept a gift or inheritance. Once a person makes a valid disclaimer, that person will be treated as if he/she had never received the disclaimed property for gift and estate tax purposes.
What Are The Elements Of A Valid Disclaimer?
A valid disclaimer is a written refusal to accept an interest in property that must be delivered:
1. Within 9 months of the creation of the interest; and
2. Before the acceptance of any benefits.
The disclaimer needs be signed by the person disclaiming the interest and must identify the disclaimed property. The property must also be passed on to another party without any direction from the person disclaiming the interest.
Can A Gift Of Inheritance Be Disclaimed In Part And Accepted In Part?
Yes. The person receiving the gift or inheritance may choose to accept specific items or portions of a gift/inheritance and disclaim the rest.
How Can A Disclaimer Be Used To Save Estate Taxes?
One situation in which the use of a disclaimer can help save estate taxes is when the person who dies leaves everything to his/her spouse and nothing for his/her children. Since inheritance passed to a spouse is not included in the taxable estate of the deceased, such an arrangement will essential put the estate tax exclusion into waste.
In this case, the spouse may disclaim his/her inheritance up to the estate tax exclusion amount so that some of the deceased’s estate may be passed on to the children tax free.
Do I Need an Estate Planning Attorney?
Consultation with an attorney experienced in estate planning is essential to crafting an estate plan that is sensitive to both your needs and those of your loved ones. An estate lawyer will know which type of will or trust is right for you and will do their best to limit your tax liability.