The identified recipient may not accept any benefit from the disclaimed property and may not direct to whom the disclaimed property passes. Except for disclaimers by a surviving spouse, the property, once disclaimed, may not benefit the person making the disclaimer. A surviving spouse may wish to disclaim assets to ensure full funding of a non-marital deduction trust created under a will or revocable trust. Assets in a non-marital deduction trust are not subject to estate tax in the estate of either spouse, whereas assets passing to the surviving spouse are subject to estate tax in the survivor's estate. Absent a direction in the beneficiary designation, the retirement plan assets or insurance proceeds cannot be transferred to the non-marital deduction trust.
Disclaimers require careful planning.
A beneficiary should consider consulting with an estate planning attorney during the administration of an estate or trust to be sure to avoid use of assets which might be disclaimed, and make the disclaimer within the required nine month period. There are other issues that may arise with disclaimers. Estate planning does not end with the creation of a will or trust. Use of disclaimers can significantly reduce estate tax liability. If you would like additional information concerning the planning or administration of an estate or trust, please contact a member of our estate planning department.