Someone designated to receive a gift or bequest from an estate is under no obligation to accept either. Rather, before receipt of the property, the person can refuse to take the property, thereby freeing the asset for transfer to a different beneficiary. Disclaimers are most often used to reduce estate, generation-skipping transfer or income tax liability without creating gift tax consequences. See I.R.C. § 2518(a).
In order to be a qualified disclaimer, the following must occur:
- The disclaimer must be in writing.
- It must be made and delivered within nine months of the creation of the interest (provided the person has reached age 21).
- There must be no acceptance of the interest or benefits.
See §§ 2518(b)(1)-(b)(4), respectively and the accompanying regulations.