Disclaimers — Federal Estate, Gift and Generation-Skipping Tax Considerations (Portfolio 848)

Description

Bloomberg Tax Portfolio, Disclaimers — Federal Estate, Gift and Generation-Skipping Tax Considerations, No. 848, presents a detailed study of disclaimers under the federal estate, gift and generation-skipping transfer tax laws. This Portfolio describes the tax uses of disclaimers, including the correction of otherwise costly errors made in the drafting of wills and trusts. In addition to examining the law applicable to transfers made after 1976, as codified in §2518, the Portfolio discusses the law applicable to pre-1977 transfers.

A disclaimer is the refusal to accept a gratuitous transfer. If the rules are complied with, a disclaimant has not made a transfer for federal gift, estate or generation-skipping transfer tax purposes. To make a qualified disclaimer, the disclaimant must make an irrevocable and unqualified refusal of the interest in writing, delivered to the transferor within nine months of the date of the transfer creating the interest (or within nine months of reaching age 21). In addition, the disclaimant cannot have accepted the interest or any of its benefits and, as a result of the disclaimer, the interest passes without any direction on the part of the disclaimant to either the decedent’s spouse or a person other than the disclaimant. Proper planning and use permits a disclaimer to serve as a valuable post mortem planning tool.

This Portfolio discusses the federal tax rules and applicable state law, indicates the areas of uncertainty, and warns of traps for the unwary in the tax and nontax law of disclaimer.

This Portfolio may be cited as Cline, 848 T.M., Disclaimers — Federal Estate, Gift and Generation-Skipping Tax Considerations.

Table of Contents

I. General
II. Disclaimer with Respect to Pre-1977 Transfers
III. The Qualified Disclaimer – 2518: Disclaimer with Respect to Post-1976 Transfers
IV. Uses of Disclaimer
V. Errors in Drafting and Use of Disclaimers, or in Failing to Use Disclaimers
VI. Conclusion