[WSBAPT] Tax Implications re Disclaimer or TEDRA

Wed Aug 24 21:05:10 PDT 2022

Correct.  If a qualified disclaimer is available, then there are no gift tax consequences.   The gift tax discussions concern situations where a qualified disclaimer is no available.
Phil Jones

Philip N. Jones
Duffy Kekel LLP
Portland, OR
pjones at duffykekel.com
(503) 853-1482 cell

On Aug 24, 2022, at 6:47 PM, Nick Pleasants <npleasants at ohswlaw.com> wrote:

This is not tax advice to anyone, but for purposes of an academic discussion, doesn’t 26 CFR 25.2511-1<https://nam11.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.law.cornell.edu%2Fcfr%2Ftext%2F26%2F25.2511-1&data=05%7C01%7Cpjones%40duffykekel.com%7Ced2ab51ca56d44e744ab08da863bd278%7C2d66ed5354fa4c2f8c4dbff1aca5479d%7C0%7C0%7C637969888759287351%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=lkrYhDhMJPGHPa8rIPrKiIfgZ4nWgb%2FuPvUzdABqSlM%3D&reserved=0>(c)(1) hold that qualified disclaimers are not taxable gifts? I’m not understanding why a 709 is required if a qualified disclaimer is executed.
See also instructions to Form 709<https://nam11.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.irs.gov%2Finstructions%2Fi709%23en_US_2021_publink16784xd0e581&data=05%7C01%7Cpjones%40duffykekel.com%7Ced2ab51ca56d44e744ab08da863bd278%7C2d66ed5354fa4c2f8c4dbff1aca5479d%7C0%7C0%7C637969888759287351%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=QJHyr43X2cTEhLTMqrs2WQmIMl3y8DXXXP%2FK9UNk4A4%3D&reserved=0> (emphasis added):
Qualified disclaimers.
 A donee's refusal to accept a gift is called a disclaimer. If a person makes a qualified disclaimer of any interest in property, the property will be treated as if it had never been transferred to that person. Accordingly, the disclaimant is not regarded as making a gift to the person who receives the property because of the qualified disclaimer.
Requirements.

To be a qualified disclaimer, a refusal to accept an interest in property must meet the following conditions.
1.          The refusal must be in writing.
2.          The refusal must be received by the donor, the legal representative of the donor, the holder of the legal title to the property disclaimed, or the person in possession of the property within 9 months after the later of:
a.  The day the transfer creating the interest is made, or
b.  The day the disclaimant reaches age 21.
3.          The disclaimant must not have accepted the interest or any of its benefits.
4.          As a result of the refusal, the interest must pass without any direction from the disclaimant to either:
a.  The spouse of the decedent, or
b.  A person other than the disclaimant.
5.          The refusal must be irrevocable and unqualified.
Best,
Nick
Nicholas Pleasants | Shareholder

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From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> On Behalf Of Philip N. Jones
Sent: Wednesday, August 24, 2022 5:03 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Tax Implications re Disclaimer or TEDRA

Heather:
I agree with your two cents on the tax issues.  Both cents.
I have extensively researched the tax consequences of such proposals, and your summary that a real bona fide enforceable dispute is needed in order to avoid gift tax treatment is a good micro-summary.
Of course, gift tax treatment is not the end of the world in Washington or Oregon, since neither state has a gift tax anymore, and the federal exclusion (unified credit) is now astronomically high ($12,060,000).
Sadly, none of us are wealthy in the eyes of the IRS.
Phil Jones

Philip N. Jones
Duffy Kekel LLP
900 S.W. Fifth Ave. Suite 2500
Portland, OR 97204
pjones at duffykekel.com<mailto:pjones at duffykekel.com>
(503) 226-1371 – office
(503) 853-1482 – cell
(503) 226-3574 - fax

From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of Heather de Vrieze
Sent: Wednesday, August 24, 2022 4:28 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: Re: [WSBAPT] Tax Implications re Disclaimer or TEDRA

Inge,

Unless there is some provision in the Will that would direct son’s share elsewhere, if you are within 9 months of dad’s death, a disclaimer by son would be a great way to get this property to the daughter.

I’ll defer to the tax gurus, but believe that unless there is a real dispute that is being settled by the execution of a TEDRA, the agreement does not change the fact that son is making a gift to daughter and a 709 would be required. At least that is what I would advise a client. If it is settlement of a real dispute, the analysis might be different.

My two cents on a warm afternoon.

Heather

Heather S. de Vrieze
Attorney-at-Law
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From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> <wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com>> On Behalf Of Inge Fordham
Sent: Wednesday, August 24, 2022 4:00 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: [WSBAPT] Tax Implications re Disclaimer or TEDRA

Colleagues,

I do not profess to be a tax guru – in fact, I always tell my clients to consult with a CPA on tax matters.  With that said, I have a relatively simple situation that I hope has a simple answer.  Situation is as follows: widowed father dies testate.  Will says estate is to be split equally between son and daughter.  Assume for sake of this hypothetical that the sole asset of the estate is a parcel of real property.  Son wants the property to go to daughter (his sister).  He has no children.  There are no other siblings involved.  In this situation, it seems son could simply disclaim his interest and PR (who happens to be son) can simply transfer the parcel to the daughter.  Are there any tax implications with the disclaimer?  The alternatives I see are: (1) PR transfers the real property to son and daughter and then son gifts his half to sister (which necessitates the filing of a form 709); or (2) son and daughter execute a TEDRA Agreement allowing PR to transfer the property solely to daughter (would that still require a form 709)?

Thank you,

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Inge A. Fordham | Attorney
Fordham Law, PLLC
3218 Sixth Avenue | Tacoma, WA 98406
Office: (253) 348-2657 | Mobile: (206) 778-3131
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