Recent Developments Create Planning Opportunities for Disclaimers of Nonprobate Property

Reed W. Easton has posted the abstract of his article “Recent Developments Create Planning Opportunities for Disclaimers of Nonprobate Property” on SSRN. The abstract is reproducted below and may also be found here.

Planning for federal gift andestate taxes may involve the use of disclaimers of property. A disclaimer canbe defined as an irrevocable gratuitous refusal to accept the ownership ofproperty passing either by lifetime gift, bequest at death or by operation oflaw as with joint tenancy with right of survivorship or payment on death. Adisclaimer must generally be affected before the disclaiming person hasaccepted any of the benefits from the transferred interest.(“Non-Acceptance Test”)

The IRS in a number of recentrulings has taken what some may say is a very flexible position incircumstances where a surviving spouse has inadvertently or due to needaccepted a benefit from joint assets or other assets that pass outside of thewill such as life insurance proceeds, pension or IRA account benefits prior tothe effective date of a disclaimer. The result is that many otherwise failedestate plans focused on doubling the size of the available tax exemption for amarried couple may have been arguably resurrected.

As discussed in this article theIRS in a number of recent private letter rulings and a very significant publicrevenue ruling involving an IRA account has arguably increased the non probateproperty subject to disclaimer by not construing the Non-Acceptance Test quiteso literally.