In some rare cases, the beneficiary of the property may wish to forgo their right to receive the particular property and let it pass to the contingent beneficiary. For federal estate, gift and goods and service (GST) taxes, a "qualified disclaimer" can be used to refuse the acceptance of property. This irrevocable election to disclaim property will treat the property as though it was never received by the original beneficiary.
Requirements For The Qualified Disclaimer:a) Refusal must be in writing,
b) Refusal must be made within nine months of the date of death, or the case of a minor, within nine months after he or she turns 21 years of age,
c) Original beneficiary must NOT have accepted any benefits from the property,
d) Original beneficiary cannot have any control of selecting the new beneficiary and
e) The property must pass to someone other than the person making the disclaimer.
Adam just passed away on March 20, he left everything to his surviving spouse Marie (primary beneficiary), with their children Joel and Jill as contingent beneficiaries. Marie was informed by her certified public accountant (CPA) that Adam used his maximum estate tax exclusion and that she was going to be inheriting over $6 million, of which $2 million is a traditional individual retirement account (IRA). Marie does not want to have an estate tax issue when she dies, and she doesn't need all of the money. What could she do?
Answer: Marie could file a "qualified disclaimer" for the IRA to disclaim her inheritance of the IRA assets, and let the IRA pass directly to their children as contingent beneficiaries.
Deferral Of Estate Tax
Managing WealthContrary to popular belief, inheriting assets isn't always a good thing. Find out what to do if you want to disclaim them.
Financial AdvisorThere are some good reasons for choosing not to accept the funds, but be sure you follow the proper process.
RetirementUnless certain action is taken by this date, distribution rules can put the youngest inheritor at a disadvantage.
RetirementA beneficiary is a person or entity that receives funds, assets, property or other benefits from a trust, will, or life insurance policy.
Financial AdvisorBeneficiary designations are a critical financial planning step that can be easily overlooked. Here's how to ensure they are properly done.
Financial AdvisorIt definitely matters who you pick as your IRA beneficiary—and how you go about it. And in some cases, your best option may be to go with a trust.
RetirementMake sure your beneficiary designations not only reflect your intentions but also meet the requirements to be effective.
RetirementLife changes make it time to rewrite your plan's designations.
InvestingA contingent beneficiary is a person who will receive a payout from a will, trust, life insurance policy or other annuity, based on a specific condition. For an insurance policy, the contingency ...
Financial AdvisorHere's how to avoid estate planning pitfalls when it comes to leaving IRA and 401(k) assets to heirs.