Postmortem Estate Planning Techniques - Qualified Disclaimer

Qualified Disclaimer
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.

Example:
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
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