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. Estate Planning

    The collection of preparation tasks that serve to manage an individual's ...
  2. Estate Tax

    A tax levied on an heir's inherited portion of an estate if the ...
  3. Gift Tax

    A federal tax applied to an individual giving anything of value ...
  4. Heir

    HeirA person who inherits some or all of the estate of another ...
  5. Beneficiary

    Anybody who gains an advantage and/or profits from something. ...
  6. Inheritance

    All or part of a person's estate/assets that is given to an heir ...
RELATED FAQS
  1. If a trust is named as the beneficiary of an IRA, can the trustee of that trust become ...

    While the IRA owner is alive, only the IRA owner can change the designated beneficiary of the IRA. Exceptions may apply ... Read Full Answer >>
  2. What's the difference between regressive and progressive taxes?

    The U.S. federal tax system and local and state tax systems are complex in that they combine progressive, regressive and ... Read Full Answer >>
  3. What are the differences between regressive, proportional and progressive taxes?

    Tax systems fall into three main categories within the tax code: regressive, proportional and progressive taxes. Regressive ... Read Full Answer >>
  4. What are some examples of a value added tax?

    A value-added tax (VAT) is a consumption tax levied on products at every point of sale where value has been added, starting ... Read Full Answer >>
  5. What are common reasons for governments to implement tariffs?

    A tariff is a tax imposed by a governing authority on goods or services entering or leaving the country and is typically ... Read Full Answer >>
  6. What are some of the arguments in favor of a value-added tax (VAT)?

    A value-added tax (VAT) offers several advantages over an income tax or traditional sales tax. It raises needed government ... Read Full Answer >>
Related Articles
  1. Taxes

    Changes In Tax Legislation And Regulation

    Keeping on top of these amendments can help you avoid penalties and take advantage of benefits.
  2. Retirement

    Disclaiming Inherited Plan Assets

    There are some good reasons for choosing not to accept the funds, but be sure you follow the proper process.
  3. Retirement

    Refusing An Inheritance

    Contrary to popular belief, inheriting assets isn't always a good thing. Find out what to do if you want to disclaim them.
  4. Taxes

    Are Taxes the Solution for Income Inequality?

    Income inequality continues to increase. Why? And are taxes the solution?
  5. Taxes

    Presidential Candidates And Wall Street In 2016

    Wall Street's influence will play a large role in the 2016 presidential race. As election season begins, candidates are showing their true colors.
  6. Taxes

    Tips on Charitable Contributions: Limits and Taxes

    An overview of the limits and tax deductions of charitable donations.
  7. Taxes

    When Is Dual Citizenship Not A Good Idea?

    It may sound useful, but there are a number of reasons that make dual citizenship a questionable choice.
  8. Savings

    How Microeconomics Affects Everyday Life

    Microeconomics is the study of how individuals and businesses make decisions to maximize satisfaction. Microeconomic principles can describe many everyday experiences. We use renting a New York ...
  9. Taxes

    Switzerland's Declining Tax Haven Appeal

    Switzerland's tax haven allure is being threatened by efforts by the US and other governments to make Swiss banks give up their much-vaunted secrecy.
  10. Taxes

    Are You Missing Out On These Tax Exemptions?

    To lower your tax bill, make sure that you're taking all the exemptions that apply to you.

You May Also Like

Hot Definitions
  1. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  2. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  3. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  4. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  5. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
Trading Center