Both New York’s EPTL §2-1.11 and Internal Revenue Code §2518 permit an individual to disclaim an interest in property transferred to him or her if certain conditions are met. Although the conditions in the EPTL and IRC are similar in many respects, there are some differences.
If the conditions in IRC §2518 are not satisfied, the disclaimer will not be a “qualified disclaimer” and will be treated as a taxable gift for federal tax purposes. Under the EPTL, unless the transferor of the disposition has provided otherwise, the disclaimed interest passes as if the disclaimant predeceased the transferor, thereby satisfying one of the requirements of IRC §2518, that the property pass without any direction on the part of the disclaimant. Tax planning is a common reason why someone would want to disclaim an interest in a trust or a bequest under a will. In certain cases, it may be desirable for a minor to disclaim an interest in an estate or trust such as to avoid estate or GST tax consequences.
Originally Published in the New York Law Journal: Trusts & Estates - January 21, 2014.
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Topics: Disclaimers, IRS, Minors
Published In: Tax Updates, Wills, Trusts, & Estate Planning Updates
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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