Qualified Disclaimer

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.



comments powered by Disqus
Hot Definitions
  1. Benchmark Bond

    A bond that provides a standard against which the performance of other bonds can be measured. Government bonds are almost always used as benchmark bonds. Also referred to as "benchmark issue" or "bellwether issue".
  2. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.
  3. Oil Reserves

    An estimate of the amount of crude oil located in a particular economic region. Oil reserves must have the potential of being extracted under current technological constraints. For example, if oil pools are located at unattainable depths, they would not be considered part of the nation's reserves.
  4. Joint Venture - JV

    A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it.
  5. Aggregate Risk

    The exposure of a bank, financial institution, or any type of major investor to foreign exchange contracts - both spot and forward - from a single counterparty or client. Aggregate risk in forex may also be defined as the total exposure of an entity to changes or fluctuations in currency rates.
  6. Organic Growth

    The growth rate that a company can achieve by increasing output and enhancing sales. This excludes any profits or growth acquired from takeovers, acquisitions or mergers. Takeovers, acquisitions and mergers do not bring about profits generated within the company, and are therefore not considered organic.
Trading Center