When is declining an inheritance not treated as a gift?

Identify the transfer before calculating the deadline

The nine month period is generally determined separately for each taxable transfer. For a lifetime gift, the period begins when the transfer becomes complete for gift tax purposes, subject to the later birthday rule above.

A gift of property, a portion or an interest is complete when the donor relinquishes dominion and control, retaining no power to change its disposition for the donor's benefit or anyone else's benefit.

A reserved power over disposition may make a gift wholly or partly incomplete. Its terms, scope and the particular facts must be examined.

For a review involving a lifetime gift, gather the transfer document and any provisions reserving powers to the donor. Ask the adviser to identify the specific interest, the relevant transfer and the basis for the proposed deadline.

Organize the disclaimer review

Use the requirements in the opening answer as a review checklist. Bring the following materials to the attorney reviewing the proposed refusal:

• The document creating the interest, together with amendments and relevant correspondence.
• A timeline of the transfer and the disclaimant's age at that time.
• The proposed written refusal and records identifying its intended recipient and delivery.
• A factual account of what the disclaimant has received or done concerning the interest.
• The documents identifying where the interest would go following the refusal.

Ask the attorney to explain how each requirement fits your documents. Keep questions about acceptance, delivery and the destination of the interest separate so that no part of the review gets overlooked.

Separate disclaimer qualification from the gift tax calculation

For an individual's transfer for less than adequate and full consideration in money or money's worth, the excess value is a gift. Applicable exclusions and deductions reduce taxable gifts.

For a transfer otherwise subject to gift tax, the donor bears primary personal liability, measured by the value passing from the donor. The recipient's identity need not be known or ascertainable when the transfer occurs.

For a proposed waiver or refusal, ask for separate explanations of the disclaimer analysis, any gift identified, and the resulting tax calculation. Gather valuation records and information about any consideration paid for the transfer.

Two related terms

Annual gift tax exclusion. This excludes qualifying present interest gifts up to the applicable annual limit for each donor, recipient and calendar year. Future interests do not qualify, and qualifying gifts to a spouse who is not a U.S. citizen have a separate, higher limit.

Basic exclusion amount. For U.S. citizens and residents, this is the amount shared by the estate and gift tax systems through a credit against tax. A surviving spouse's applicable exclusion also includes any deceased spousal unused exclusion amount.

A perspective on getting experienced help

A speaker's reminder about preparation is relevant when gathering documents for a disclaimer review:

"You cannot dabble in the strategies that I'm about to discuss. It does take some work or in the beginning, you could partner with someone that knows what they're talking about."

Frequently asked questions