Disclaimers 

A disclaimer is a refusal to accept an inheritance. If it is used at the right time and in the proper  circumstances, a disclaimer can result in a substantial federal estate tax savings.

Requirements for a valid disclaimer: 

1.  It must be in writing.

2.  It must be an irrevocable and unqualified refusal to accept an interest in the asset.

3.  It must be delivered to the executor within nine months of the date of death.

4.  The person signing the disclaimer must not have accepted the asset, or any benefit from the asset, such as rent, dividends or interest.

5.  The person signing the disclaimer cannot direct to whom the interest in the property will pass.  The decedent's estate plan must determine to whom the property will pass.  If there is no estate plan, California intestacy law will determine to whom the property will pass.

Reasons for using a disclaimer:

1.  The intended beneficiary of the estate may be wealthy, and receiving an inheritance will result in his or her own estate paying additional federal estate taxes.  By disclaiming the inheritance, the beneficiary can shift the inheritance to some other person (such as his or her children).  However, for this to occur, the decedent's estate plan must specify that if the beneficiary had died before the decedent, the inheritance would instead go to his or her children.


2. Problems and mistakes in estate plans can be corrected by using a disclaimer.  For example, a disclaimer can be helpful if assets pass to beneficiaries other than the surviving spouse, causing federal estate tax to be due.  If a disclaimer can be used, the assets in some cases can be transferred to the surviving spouse, allowing the estate to take advantage of the marital deduction.  Another approach would involve all of the beneficiaries disclaiming their inheritances, causing the estate to be distributed intestate to the surviving spouse and therefore preserving the marital deduction. 
 

3.  Distributions to remainder beneficiaries of a trust can be accelerated by having the initial beneficiary disclaim part of the trust. 

4.  The disclaimer might be part of a disclaimer trust, which is intended to reduce federal estate taxes.