Exercising Disclaimers in Estate Plans: Meeting Section 2518 Requirements

Avoiding Nonqualified Disclaimers and Disclaiming Inherited IRAs After SECURE

Recording of a 110-minute CPE webinar with Q&A


Conducted on Wednesday, August 25, 2021

Recorded event now available

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Course Materials

This course will explain why disclaimers are powerful, tax-saving estate planning tools considering the constant flux of estate planning rules. The panelist will discuss how disclaimers are used to incorporate flexibility in post-mortem planning for beneficiaries.

Description

Simply put, a disclaimer is a refusal to accept a gift or bequest. A proper disclaimer results in the property being treated as if the transferee never received it.

There are many tax reasons a recipient may want to disclaim a bequest and, although the foremost consideration is usually tax savings, many of these go beyond tax. Traditional estate plans pass assets from the grandparents to parents, and then grandchildren. Using partial or full disclaimers allows the named beneficiary to skip a generation. This can allow the immediate distribution of some or all of an asset to grandchildren who may have a greater financial need. This, too, could result in overall transfer and income tax savings to the family as a whole.

Disclaiming an asset under Section 2518 gives the primary beneficiary nine months to consider post-mortem planning. However, improperly making the disclaimer can result in a nonqualified disclaimer. This results in the recipient receiving the asset. Any subsequent transfer would be deemed a gift and subject to gift tax or additional use of the donor's exemption. Most advisers recommend adding disclaimer language to related documents, including wills, beneficiary designations, and trusts.

Listen as our panelist illustrates common estate scenarios where disclaimers can save significant income and transfer tax, the steps necessary to make a qualified disclaimer, explain specific situations and the steps necessary to make a disclaimer, and how the new recipient is determined when an inheritance or gift is disclaimed.

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Outline

  1. Disclaimers: an overview
  2. Planning for disclaimers
  3. Disclaimers after the SECURE Act
  4. Determining the new recipient
  5. Disclaiming a gift or bequest: necessary steps
  6. Nonqualified disclaimers
  7. Illustrations

Benefits

The panelist will review these and other key issues:

  • New considerations for disclaiming inherited IRAs after the SECURE Act
  • How the secondary recipient is determined after a property is disclaimed
  • What happens when a property is not properly disclaimed but subsequently transferred?
  • What are the required steps and timetable for disclaiming a gift or bequest?

Faculty

LaMendola, Salvatore
Salvatore J. LaMendola

Member
Giarmarco Mullins & Horton

Mr. LaMendola specializes in charitable planning and planning for retirement plan benefits. He is the editor of the...  |  Read More

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