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.

  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 Management

    Property management is the administration of residential, commercial ...
  4. Property Tax

    A tax assessed on real estate by the local government. The tax ...
  5. Property Rights

    Laws created by governments in regards to how individuals can ...
  6. Personal Property

    Personal property is a type of property which can include any ...
Related Articles
  1. Retirement

    Disclaiming Inherited Plan Assets

    There are good reasons to not accept inherited assets, but be sure you follow the proper process.
  2. Managing Wealth

    Declining An Inheritance

    Inheriting assets isn't always a good thing. Here's what to do if you want to disclaim them.
  3. Investing

    Use Real Estate To Put Off Tax Bills

    Find out how you can build wealth and reduce your taxes.
  4. 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.
  5. Taxes

    Your Property Tax Assessment: What Does It Mean?

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

    10 Things to Know About 1031 Exchanges

    Real estate swaps grow popular, but traps are many. Here's 10 things to know when considering 1031 swaps. Also: Beware new rules on vacation homes.
  7. Taxes

    Avoid Capital Gains Tax on Your Home Sale

    If you have property to sell and want to avoid capital gains tax, a Section 1031 exchange may be the answer.
  8. Personal Finance

    State Laws Dictate Division Of Joint Property

    In breakup, divorce or death, community or common law will determine how property is divided.
  9. Taxes

    Trade Properties To Keep The Taxman At Bay

    Like-kind exchanges can mean a much lower tax bill on real estate for savvy investors.
  1. 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. Entrepreneur

    An Entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture. ...
  2. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  3. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  4. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  5. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  6. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
Trading Center