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Estate planning and qualified disclaimers

In some cases, New Yorkers go through the process of having a will drafted, but they neglect to update it after certain life changes have occurred. Additionally, individuals may feel uncomfortable discussing their estate planning process with loved ones, potentially leaving loved ones in the dark. Disclaimers can assist both the grantor and the named recipient of gifts and bequests.

One of the pitfalls of establishing an estate plan is providing appropriate gifts or bequests to loved ones. In some situations, a recipient may wish to refuse such a gift. A beneficiary can't be forced to accept such a gift. However, he or she must renounce it in a timely manner. Additionally, this disclaimer has to meet certain requirements to be effective. A qualified disclaimer can effectively renounce a beneficiary's interest in a bequest. It acts to skip the beneficiary and move onto a contingent beneficiary. If a person fails to satisfy the requirements to legally renounce the gift, tax implications can arise.

One of the requirements is that the qualified disclaimer must be in writing. This letter must be delivered to the property holder within nine months of the transfer or the individual turning 21. Additionally, the person who is refusing the gift must not include any directions on how the gift should be used because he or she should not have any incidents of ownership. If these steps are followed, the Internal Revenue Service will treat the gift as if it has never been received and the property will pass to a contingent beneficiary. In some cases, estate planning can intentionally leave property to individuals who will likely disclaim them so that other survivors can receive the property without being treated as gifts.

Individuals who wish to provide for qualified disclaimers may seek the counsel of an estate planning attorney. Clear instructions regarding contingencies should be included to prevent unforeseen circumstances.

Source: The Edwardsville Intelligencer, "Using disclaimers in estate planning", Larry Zucksworth, May 28, 2014

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