• Skip to navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

American Academy of Estate Planning Attorneys

AAEPA, Inc

Find a Member Member's Login
Call Today (800) 846-1555
  • Membership
    • Membership Membership
    • submenu
      • Why Join?
      • Member Requirements
      • Become A Member
      • Meet the Team
  • Estate planning software
  • Education
  • Practice management
    • Practice management Practice Management
    • submenu
      • 11 Essential Systems
      • Coaching
      • Law Firm Marketing
  • Resources
    • Resources Resources
    • submenu
      • Live Training
      • Blog
  • Contact Us

Using Disclaimers to Achieve Client Goals

Home » Estate Planning » Using Disclaimers to Achieve Client Goals
Disclaimers

It’s difficult to even think that someone might not want to accept inherited assets. But sometimes clients don’t need any more assets and a newfound inheritance simply may compound their estate tax issues. This is the first of two articles regarding disclaimers. This first article examines the basics of disclaimers and a quick example. The second article examines a more complex “double disclaimer” and an example of that situation.

A “qualified disclaimer” is a creature of statute. It’s found in Section 2518 of the Code. If you meet the requirements, then the disclaimant is treated as having predeceased the decedent and it’s not considered to be a gift by them and won’t use any of the erstwhile recipient’s gift/estate tax exclusion.

Section 2518 has several requirements:

  1. The refusal must be in writing,
  2. The refusal must be received by the transferor of the interest (or the representative or legal title holder) within 9 months of the date of death or when the instrument creating the transfer became irrevocable (or the date the recipient achieves age 21),
  3. They must not have accepted any of the benefits of the property, and
  4. The interest must pass without direction to the decedent’s spouse or someone other than the disclaimant.

Let’s look at a quick example:

Granny leaves a Will leaving Blackacre to John. The terms of the Will provide that if John predeceases Granny, the bequest goes to John’s daughter, Betty. Blackacre is worth $3 million. John already has used all of his exclusion. He’d like to see Blackacre go to his daughter, Betty. If John accepts Blackacre and makes a gift of it to Betty, he’d be making a taxable gift of $3 million, which would incur a $1.2 million gift tax. If John does a timely qualified disclaimer, Blackacre would pass as though John predeceased Granny. Since Granny’s Will provides that the property would go to Betty if he predeceased her, this would accomplish John’s wishes without needing to direct where it goes. This saves John $1.2 million in these circumstances.

If you’re contemplating a disclaimer, it’s vital to map out where the disclaimed property would go after the disclaimer. Sometimes this can be very complicated. But it’s absolutely essential since the disclaimant has no control over it. It’s somewhat like releasing water from a dam. You need to know what the course of the river is before you release the water. Sometimes it may be possible to change the course of the river by doing a double disclaimer or some other mechanism.

After you’re confident the disclaimed property would go where intended, it’s imperative you follow the requirements of Section 2518 to the letter. For example, it’s impossible to get an extension on the 9-month deadline for a disclaimer. It doesn’t matter if the disclaimant were sick or had extenuating circumstances. The deadline cannot be changed.

The next article in this two-part series will examine a double disclaimer and how that can work to achieve client goals.

Stephen C. Hartnett, J.D., LL.M.
Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com

  • Author
  • Recent Posts
Steve Hartnett
Steve Hartnett
Director of Education, American Academy of Estate Planning Attorneys
Steve Hartnett
Latest posts by Steve Hartnett (see all)
  • Double Your Gifting with Spousal Gift-Splitting - January 11, 2022
  • Tax Planning for 2022 - December 28, 2021
  • Donor Advised Funds: Too Good to Be True? - August 10, 2021
SHARE

About Steve Hartnett

Director of Education, American Academy of Estate Planning Attorneys

Primary Sidebar

Subscribe to our blog

Recent Posts

  • Spring Summit 2022: Celebrating Friendship in the Lone Star State
  • Aging Parents and Estate Planning
  • How Do I Title Thee…Part I
  • Turning Stalled Out Goals into Actions
  • What Makes a Will or Trust Invalid

Categories

  • Academy Girl Friday (33)
  • Client Services (238)
  • Coaching (33)
  • Consumer Advantage (3)
  • Counseling (21)
  • Elder Law (5)
  • Estate Planning (921)
  • Estate Planning Documents (5)
  • Estate Planning Education (199)
  • Financial Analysis (3)
  • Financial Services (1)
  • General (19)
  • Law Firm Marketing (281)
  • Law Firm Net Revenue (7)
  • Law Firm Staffing (99)
  • Law Firm Technology (45)
  • Law Firm Web Tips (185)
  • Leadership (191)
  • Legal Education (646)
  • Marketing Tools (2)
  • Medicaid (1)
  • Member Services (1)
  • Owners Compensation (1)
  • Peak Performer Focus (1)
  • Practice Building Calls (1)
  • Practice Management (496)
  • SEO/Social Media Support (3)
  • Software (6)
  • Strategic Planning (9)
  • Uncategorized (15)

Footer

logo of American Academy of Estate Planning Attorneys

About Us

  • Meet the Team
  • Site Map
  • Legal Notice
  • Privacy Policy

Explore Our Services

  • Coaching
  • Estate planning software
  • Events
  • Legal education
  • Marketing
  • Web and SEO

Keep in Touch

Mon-Fri

9444 Balboa Ave. Suite 300

San Diego

(800) 846-1555

info@aaepa.com

Take Back Control of Your Business and Your Life

+

footer section | American Academy of Estate Planning Attorneys

© 2022 American Academy of Estate Planning Attorneys, Inc All rights reserved.

We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept All”, you consent to the use of ALL the cookies. However, you may visit "Cookie Settings" to provide a controlled consent. Don't sell my personal information.
Cookie Settings Accept All
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
Save & Accept