Legal Blog

The Weekly Scenario: Disclaiming Assets

Question: I’m set to receive an inheritance from my mother. I don’t need the money and don’t foresee needing it in the future. Frankly, I’d like to pass it right to my children instead. Is a disclaimer of assets worth considering and are there adverse estate tax consequences to using a disclaimer?

Answer: If you disclaim your interest in the inheritance after your mother’s death, but before you accept any benefit from the inheritance, the inheritance will pass as though you predeceased your mother. To be sure, we would look to the terms of your mother’s estate plan to determine who would be the beneficiaries to receive the disclaimed portion of the inheritance.

If the Will provides that should you predecease your mother, your share of the inheritance is to be distributed to your children equally, then you children would receive those disclaimed assets. If a “qualified” disclaimer is made (there are certain attributes that need to be directly adhered to for a qualified disclaimer), you will not be deemed to have made a gift to your children and thus you shouldn’t suffer any adverse tax consequences.

However, if your mother’s estate is significant and/or you are in a state that has an estate tax, it is possible that a disclaimer could result in the imposition of estate tax. In any case, we would need to assess the situation before we advised you to disclaim assets.

Generally, by disclaiming assets below the estate tax exemption, the assets will not be included in your estate and should avoid the imposition of any estate tax at your death.

As always, if you have any questions or would like to learn more, please let me know.

ABOUT STEVE SHANE

Steven E. Shane

Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates.

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