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.

BREAKING DOWN '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. Disclaim

    To renounce an interest or obligation by way of a legal instrument ...
  2. Disclaimer Trust

    A trust that has embedded provisions (usually contained in a ...
  3. Property Tax

    A tax assessed on real estate by the local government. The tax ...
  4. Property Management

    The administration of residential, commercial and/or industrial ...
  5. Transfer Tax

    Any kind of tax that is levied on the transfer of official documents ...
  6. Property Rights

    Laws created by governments in regards to how individuals can ...
Related Articles
  1. Financial Advisor

    Disclaiming Inherited Plan Assets

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

    Your Property Tax Assessment: What Does It Mean?

    The amount of a property tax bill is based on the property’s value, the exemptions it qualifies for, its use and the local property tax rate.
  3. Retirement

    Estate Planning for Beginners, Part Four

    This is how disclaimer trusts work and when it makes sense to use them in an estate plan.
  4. Taxes

    How Does a Tax-Free Exchange Work?

    In regards to the sale of property, particularly in real estate, a 1031 exchange is increasingly being recognized for its tax benefits to investors of all levels.
  5. Taxes

    Your Property Tax Assessment: What Does It Mean?

    Understanding your property taxes can protect you from financial shocks.
  6. Taxes

    Sell Your Rental Property For A Profit

    Being a landlord can be taxing, especially when you want to sell. Find out how to reduce your burden.
  7. Investing

    How Property Rights Affect Economies

    Property rights are laws governments create that enable investors to control, benefit from, and transfer property.
  8. Investing

    Your Property Tax Assessment: What Does It Mean?

    Property taxes are a primary source of revenue for governments, and they’re a big expense for homeowners. They can vary widely depending on where you live.
  9. Taxes

    Getting U.S. Tax Deductions On Foreign Real Estate

    If your home or second home is not in the United States, you can still get U.S. tax deductions. How many and what kind depends on whether you also rent it.
RELATED FAQS
  1. Can I refuse a gift by providing a "Qualified Disclaimer," and what does this entail?

    While refusing a gift may seem a little absurd to many, there are several good reasons that an individual might want to do ... Read Answer >>
  2. Can an IRA owner disclaim his widow's account but exclude one spendthrift contingent ...

    From your question, it appears that the widow is the sole primary beneficiary, in which case any portion properly disclaimed ... Read Answer >>
Hot Definitions
  1. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  2. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  3. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
  4. Tax Refund

    A tax refund is a refund on taxes paid to an individual or household when the actual tax liability is less than the amount ...
  5. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced within a country's borders in a specific time period, ...
  6. Inflation

    The rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of ...
Trading Center