Disclaimers Provide Flexibility in Estate Planning
The Wall Street Journal published an article recently about the popularity of Disclaimers as a tool for effective estate planning. As millions and millions of American families are figuring out how to manage a tsunami of sizable inheritances and estates, the seemingly unintuitive tool has found widespread application for tax planning around these generous gifts.
A disclaimer allows an heir to reject a gift which would be inherited, as if the heir never received the asset at all. For savers looking to maximize their families assets while minimizing their tax liabilities, the disclaimer is a flexible strategy that can best facilitate both outcomes. An heir has full control over what exactly they would like to disclaim. To most effectively make use of these options, speak to an experienced Colorado Estate Planning Attorney.
IRAs often have mandatory minimum payouts, which can jeopardize tax and estate planning efforts if inherited and allowed to operate unopposed. These payouts can impose higher tax brackets and reduce eligibility for social services. However, a disclaimer can allow unwanted inherited assets to fall upon descendants who may value them greatly, while retaining the flexibility to inherit assets the heir would still like to receive.
Such a disclaimer would, of course, reduce the assets available to the individual heir. However, the amount of wealth in the family becomes greater overall than it would be without the disclaimer. The case-in-point would be a high income parent inheriting a sizable IRA with a mandatory payout from a grandparent upon the grandparent’s death. If the parent disclaims this IRA and allows it to fall upon their children, the parent and the children have greater overall wealth together than if the parent had inherited it and been pushed into a higher tax bracket.
State laws for procedure regarding execution of disclaimers vary with jurisdictions, and the availability of this tool is time-sensitive. The legal mechanics are even more complex when dealing with children inheriting these fortunes. Additionally, financial planning firms have their own internal policies on how they approach this legal mechanism. If you have received a sizable inheritance and want to ensure you properly maximize its value to your family, you need to talk to an experienced Colorado Estate Planning Attorney. Any mistake can jeopardize years of hard, careful work.
A well executed disclaimer can allow a family to avoid unnecessary taxes while growing the family’s wealth, by letting heirs receive thoughtful gifts from their loved ones. Qualified disclaimers, planned in advance, allow the holder of such assets to relieve some of the burden from their heirs, and plan contingent beneficiaries in advance of a disclaimer. To achieve the best outcome for your family with your estate, you need to work with an experienced Colorado Estate Planning Attorney.
For those in Colorado who would like to avoid unnecessary taxes while growing the family’s wealth, consider talking to a trustworthy and seasoned Colorado estate planning attorney. For more information contact Adams Law for a consultation. – Roger Adams