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How Can Qualified Disclaimers Be Used To Benefit An Estate Plan?

Regulations book. Law, rules and regulations concept.

What is a Disclaimer?

When someone creates a trust for beneficiaries, those beneficiaries are not required to accept that beneficial interest in the trust.  Though it is unlikely that someone would turn down a gift in trust, there are some circumstances where refusing that gift can provide tax benefit.  This is done by disclaiming the interest in the trust

When one “disclaims” an interest in a trust, the person disclaiming is deemed for all purposes to have predeceased the person who established the trust. After a disclaimer, the disclaimed asset will pass pursuant to the terms of the trust that apply in the event the disclaimant died before the trust’s grantor. 

Qualified Disclaimers are Needed to Provide the Tax Benefit Sought

If a person executes a “qualified disclaimer” of an interest in a trust, that interest passes to the next in line and is not treated as coming to the next in line by gift from the disclaimant; rather, the interest is treated as coming from the trust’s grantor.

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