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Disclaiming an interest in an asset, according to IRS rules, results in such an interest never being transferred to the individual making the disclaimer--thus a disclaimer has essentially the same effect as the death of the beneficiary with regard to the interest in the disclaimed asset.
Furthermore, the disclaiming beneficiary must not have incurred any acceptance of benefits from the assets, and the assets must pass without direction or discretion on behalf of the disclaiming party.
If a disclaiming beneficiary is indebted to the estate, the instrument should specify whether the debt may be set off against the alternative takers (who might be the disclaimant's children).
Walshire could have fulfilled his intentions by disclaiming a percentage of his entire interest equivalent to the value of the remainder interest which he had disclaimed.
Under most state laws, disclaimers result in the bequest or inheritance passing to the person next in line to receive a share of the decedent's estate; creditors of the disclaiming heir may not reach the property.
In contrast, a disclaiming heir or devisee does not restore the status quo, for the decedent cannot be revived.
The disclaiming heirs argued that, as a result of the disclaimer, no interest in property or right to property was ever created; therefore, a Federal tax hen could not attach to the disclaimed property.
However, a disclaimer is not qualified if there is mutually bargained-for consideration that results in a promise or agreement that the disclaimant will receive a benefit for disclaiming.
By disclaiming the portion in excess of the unified credit amount, the estate may be transformed into a nontaxable estate when the disclaimed assets end up passing to the decedent's spouse.
If a disclaiming instrument does not constitute a "qualified disclaimer," the applicable interest is not treated as being disclaimed for Federal tax purposes.