Qualified Disclaimers: An Effective, Overlooked Postmortem Estate Planning Tool
By Marvin L. Korobow, Esq., CPA
A QD under IRC section 2518 is a handy, near-magical tool that allows estate planning to be done by the personal representatives (e.g., executors and administrators) and beneficiaries for two estates at the best possible time: after the death of the testator. At this time, the size, nature, and details of the estate and the needs, ages, health, wealth, and family circumstances of the beneficiaries are definitively known.
The QD can save taxes, not only in the estate of the decedent, but also in that of the survivor. The QD permits the decedent to rule from the grave and effectively rewrite the will. Its anticipated possible use after death permits some premortem planning as well, when drafting wills, trusts, and powers of appointment.
The scope of the QD’s uses for estate planning runs the gamut of the IRC sections relating to transfer tax and is only limited in application by the knowledge, skill, and creativity of the estate planner in using those sections along with the other provisions of federal tax law and applicable state laws.
To be effective under IRC section 2518 the disclaimer must—
With careful application of the technical rules under IRC section 2518, the QD can be used, among other things, to—
If a will contains an appropriate provision, a valid QD can be made by a surviving spouse even though the disclaimed interest will pass to a trust in which the spouse has an income interest (e.g., a credit shelter or bypass trust).
A disclaimer can be partial [NY EPTL 2-1.1 1 (e)] or complete, and can be made by—
In every estate, the CPA, together with the attorney, should analyze the situation to make the most effective use of this valuable postmortem tool.
Lawrence M. Lipoff, CPA
Deloitte & Touche LLP
Susan R. Schoenfeld, JD, LLM, CPA
Bessemer Trust Company N.A.
Jerome Landau, CPA
Debra M. Simon, CPA
Merdinger Sruchter Rosen & Corso P.C.
Richard H. Sonet, JD, CPA
Marks Paneth & Shron LLP
Peter Brizard, CPA
Ellen G. Gordon, CPA
Margolin Winer & Evens LLP
Jeffrey S. Gold, CPA
Joseph R. Beyda & Company P.C.
Harriet B. Salupsky, CPA
Weinick Sanders Leventhal & Company LLP
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