A disclaimer is a refusal to accept
an inheritance. If it is used at the right time and in the right
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 heir 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 heir 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
original heir 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.
