Disclaimer of Property

A disclaimer of property 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 of property 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 of property may need to be acknowledged or recorded.

Disclaimer of Property

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.
  • You can possibly shift a tax burden to someone else in a lower tax bracket, or who may live much longer than you, thus delaying the tax.
  • You can eliminate an Estate Tax obligation you might have by receiving the gift, thus allowing the gift to be received by someone who may not have the same Estate Tax obligation.

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.

The attorneys with Beyer, Pongratz, and Rosen have vast experience with every aspect of estate planning, probate, and business structuring. We are here to help! Give us a call to get started 916-369-9750 or contact us online to set up a FREE consultation. We look forward to working with you.