What is a Disclaimer of Property?

piggybank1A disclaimer is an estate planning tool that allows you to redistribute transfers of assets or property by refusing to accept a gift, bequest, or other form of property transfer.  Once disclaimed, the property is then distributed to the next recipient.  The person disclaiming the property, a disclaimant, is not regarded as having received the property, or having transferred the property.  As a result, no gift, estate, or generation-skipping transfer tax is imposed on the disclaimant.

After you receive a gift or bequest, you generally have up to nine months to decide whether to disclaim the property. (State law may require a shorter period.)  During that period, you may not accept any of the benefits of the property if you ultimately decide to disclaim the property.  When you disclaim the property, you may not direct who is to receive the property.  The property passes as if you never held an interest in it.  For example, you disclaim property left to you by your spouse, and it then passes to your children under the terms of your spouse’s will.  The disclaimer must generally be in writing and be signed, and specifically identify the interest in the property being disclaimed. State law may impose other requirements, such as that the disclaimer may need to be acknowledged, or recorded.

What Are Some Reasons for Disclaiming Property?

  • You already have enough assets.
  • You can shift income-producing property to someone in a lower income tax bracket.  However, unearned income of a child subject to the kiddie tax may be taxed at the parents’ income tax rate.  Careful planning may be required.
  • Disclaiming the property, or an interest in the property, may enable the property to qualify for a marital or charitable deduction.
  • Disclaimers can be used to make changes to an estate plan at a later time.

Estate planning and the use of disclaimers can be very complex, and highly individualized expert advice is critical.  Always seek the advice of an estate attorney before proceeding.

About Mark Rioboli

Mark A. Rioboli, CFP®, CFS is Director of Wealth Management for Independence Advisors, bringing over 25 years of experience in the wealth management industry. Have a question for Mark? CLICK HERE TO ASK MARK

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