Qualified Disclaimer

AAA

DEFINITION of 'Qualified Disclaimer'

A refusal to accept property that meets with provisions set forth in the Internal Revenue Code Tax Reform Act of 1976 allowing for the property or interest in property to be treated as an entity that has never been received. These types of refusals can be used to avoid federal estate tax and gift tax, and to create legal inter-generational transfers which avoid taxation, provided they meet the following set of requirements:

1. The disclaimer must be made in writing and signed by the disclaiming party.
2. The disclaimer must identify the property, or interest in property that is being disclaimed.
3. The disclaimer must be delivered, in writing, to the person or entity charged with the obligation of transferring assets from the giver to the receiver(s).
4. The disclaimer must be written less than nine months after the date the property was transferred. In the case of a disclaimant aged under 21, the disclaimer must be written less than nine months after the disclaimant reaches 21.

Disclaimed property is given to the "contingent beneficiary" by default.

INVESTOPEDIA EXPLAINS 'Qualified Disclaimer'

Due to the strict regulations that determine whether disclaimers are considered "qualified" according to the standards of the Internal Revenue Code, it is essential that the renouncing party understand the risk involved in disclaiming property. In most cases, the tax consequences of receiving property fall far short of the value of the property itself. It is usually more beneficial to accept the property, pay the taxes on it, and then sell the property, instead of disclaiming interest in it.

When used for succession planning, qualified disclaimers should be used in light of the wishes of the deceased, the beneficiary and the contingent beneficiary.

RELATED TERMS
  1. Gift Tax

    A federal tax applied to an individual giving anything of value ...
  2. Inheritance

    All or part of a person's estate/assets that is given to an heir ...
  3. Trust

    A fiduciary relationship in which one party, known as a trustor, ...
  4. Disclaim

    To renounce an interest or obligation by way of a legal instrument ...
  5. Estate

    All of the valuable things an individual owns, such as real estate, ...
  6. Estate Planning

    The collection of preparation tasks that serve to manage an individual's ...
Related Articles
  1. Changes In Tax Legislation And Regulation
    Taxes

    Changes In Tax Legislation And Regulation

  2. Disclaiming Inherited Plan Assets
    Retirement

    Disclaiming Inherited Plan Assets

  3. Refusing An Inheritance
    Retirement

    Refusing An Inheritance

  4. If a trust is named as the beneficiary ...
    Retirement

    If a trust is named as the beneficiary ...

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center