IRS gift tax section 2518 applies primarily to estate planning. Section 2518 of the Internal Revenue Code allows any beneficiary of an estate or trust to make what is called a “qualified disclaimer”. This disclaimer will be looked at by the Internal Revenue Service as the estate or trust having not accrued any interest whatsoever. The purpose of making a qualified disclaimer is to allow estate property to go to a trust for the benefit of the beneficiary. For the most part, this section of the Internal Revenue Service Code is only relevant in an estate situation whereby an individual who may have set up a will or a trust has bequeathed property to a surviving spouse, or child (whether underage or adult).
What is a Qualified Disclaimer?
A qualified disclaimer is a refusal to accept a gift or a bequest that may be able to accrue taxable interest. Usually the purpose of a qualified disclaimer is to write a provision to a will or trust that will alleviate some of the tax burden on the interest of the item.According to the Internal Revenue Service, a qualified disclaimer can be made in relation to a gift of property or estate funds (for example to a trust). Let’s say that a married couple has a surviving spouse trust set up so that upon the death of one spouse, the other will automatically be the beneficiary of the trust. Having a qualified disclaimer makes it so that the surviving spouse can receive the trust or estate funds free of tax.
Because this section of the Internal Revenue Service Code is tailored towards estate planning, many people will set this up as an addendum to their will. They may in effect add a “disclaimer trust” provision to their will.
How do You Get a Qualified Disclaimer?
The qualified disclaimer will need to be made in writing and given to whomever is transferring the interest of the property or gift. If that person is deceased, then it will need to be given to the lawyer who is representing the person or the estate. You cannot have accepted any of the benefits associated with the property to take a qualified disclaimer
Understanding the IRS tax code can be quite a challenge for most people, and using tools such as a qualified disclaimer to avoid taxes or gift tax can be complex. It is a good idea to talk to a tax attorney if you have questions about IRS gift tax section 2518 or about any other aspect of estate planning or gift giving.