Understanding the differences between ABLE Account and Special Needs Trust

June 3, 2024

Planning for the financial future of a loved one with special needs is crucial. Two essential tools in special needs planning are ABLE accounts and Special Needs Trusts (SNTs). Understanding the differences between an ABLE Account and Special Needs Trust will help you make the right choice.

An Achieving a Better Life Experience (ABLE) account is a valuable tool for people with disabilities. As Special Needs Answers reports, they can use it to save up to $18,000 annually starting in 2024. Unlike other accounts, this doesn’t deprive people of means-tested benefits.

ABLE account holders can save up to $100,000 tax-free and spend the funds on disability-related expenses. This covers assistive technology, transportation, education and even leisure activities. Account administration occurs at the state level, and eligibility is set to expand. While anyone disabled before age 26 qualifies now, the threshold will increase to 46 in 2026.

Likewise, individuals can open and manage their ABLE accounts. This provides much more financial independence than a Special Needs Trust (SNT).

A Special Needs Trust (SNT) is a legal document that provisions funds for disabled loved ones. Like the ABLE account, these funds don’t impact eligibility for Medicaid or SSI. An SNT can pay for items that government benefits don’t cover, including therapy, medical care, recreation and travel.

However, there are some limits. Without affecting benefits, SNTs generally can’t be used for essentials, like food and shelter. A Special Needs Trust also can’t cover cash payments or gift cards. Unlike an ABLE account, a trustee manages the SNT. This trustee works with special needs planners to maximize the trust’s value.

One of the main differences between ABLE accounts and Special Needs Trusts is their contribution limits. ABLE accounts are capped at $18,000 annually, with a total savings limit of $100,000. SNTs have no set contribution or savings limits but have tighter controls.

An individual manages their ABLE account. In comparison, a trustee manages an SNT in the name of a disabled individual.

Another critical difference is eligibility of the disabled person. For now, ABLE accounts are only available to people who became disabled before age 26. This is in contrast to SNTs, which have no age restrictions. An SNT is ideal for long-term asset management, while ABLE accounts offer flexibility.

Consult with an elder law attorney to have a full understanding of the differences between an ABLE Account and a Special Needs Trust. Choosing between the two depends on your family’s goals and needs. If you’re looking for a quick, easy, flexible way to save for a loved one’s disability-related expenses, an ABLE account might be ideal. However, a Special Needs Trust is better for long-term planning with no savings limits.

Key Takeaways:

ABLE Account: Offers flexibility and direct control for disabled individuals, with a $100,000 savings limit.
Special Needs Trust: Offers greater flexibility and long-term security but requires a trustee for oversight.
Planning is a Must: An ABLE Account or SNT may better fit your situation. Either way, you should begin planning sooner rather than later to protect your loved one.
Plan Ahead: Work with an estate planning attorney to decide which tool is best for your family.

If you would like to learn more about special needs planning, please visit our previous posts.

References: Special Needs Answers (Nov. 13, 2023) “ABLE Accounts in 2024: Save Up to $18,000 Annually”

Special Needs Answers (February 12, 2019) “What Can a Special Needs Trust Pay For?”

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Key Estate Planning Strategies for Executives

May 23, 2024

Executives manage complex financial landscapes while striving for professional success, creating unique estate planning goals and challenges. Central Trust Company shared insights in the article “Estate Planning For Executives,” which focused on liquidity concerns, tax efficiency and beneficiaries for certain assets. This article explores key estate planning strategies for executive’s unique goals.

Executives often face liquidity challenges and may have a significant portion of their wealth tied up in company stock. Diversifying investments and implementing strategies to manage concentrated stock positions are critical to mitigate risk and enhance financial security.

Navigating tax-efficient giving strategies is essential for executives looking to give back to their communities or support charitable causes. Estate planning considerations, including lifetime gifts and the transfer of vested stock options, play a crucial role in preserving wealth and minimizing tax liabilities.

Transitioning from a successful career to retirement can be exciting and daunting for executives. Planning for retirement involves forecasting complex benefits, managing investment portfolios and ensuring a smooth transition from the accumulation phase to the distribution phase of their financial life.

Comprehensive estate planning for executives includes strategies that address their income tax bracket, estate tax rates and various types of investments. Strategies such as wills, trusts, powers of attorney (POAs) and advance directives are central to protecting an executive’s assets and support building wealth.

A knowledgeable and experienced estate planning attorney is central to a holistic plan that meets an executive’s goals, including:

Reducing taxes and taxable estate values.
Transferring stock options and other nuanced investments to heirs.
Preserving or building their wealth.

Key Estate Planning Strategies For Executives:

Address Unique Challenges: Consider liquidity, stock options, estate taxes and beneficiaries.
Maximize Tax-Efficiency: Explore tax-efficient strategies to preserve wealth.
Build a Comprehensive Plan: Include wills, trusts, and POAs to address diverse financial needs and goals.
Define Personal Objectives: Define personal philosophies and objectives to create a comprehensive plan that aligns with your vision for the future.

Given the complexities of their careers and wealth management needs, executives face unique financial and estate planning challenges. Addressing key concerns and defining personal objectives helps executives secure a financial future for themselves and their families. If you would like to learn more about estate planning for wealthy couples and families, please visit our previous posts.

Reference: Central Trust Company (July 19, 2023) “Estate Planning For Executives”

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Maximizing Tax-Free Giving to Children

May 21, 2024

In the ever-evolving landscape of wealth management, affluent estate owners choose to support their children and grandchildren financially during their lifetimes. While the desire to make a positive impact is evident, navigating the tax implications of such generosity can be complex. Fortunately, several strategies exist to facilitate tax-efficient giving, while maximizing the benefits for donors and recipients. Based on Kiplinger’s article, “Three Ways to Give to Your Kids Tax-Free While You’re Still Alive,” we explore three strategies that can maximize tax-free giving to children in your estate planning.

One estate planning strategy leverages possible tax breaks on capital gains. Beneficiaries of assets that increase in value have traditionally received a break if the IRS calculates capital gains tax based on the inherited value, not when the decedent purchased the asset. The inherited asset’s higher valuation is considered a “stepped-up cost basis” and lowers capital gains tax on any increase in value.

You can give to your children during your lifetime and get capital gains tax breaks if the recipient’s taxable income falls below certain thresholds. If a single child’s taxable income is below $47,025 or a married child’s is below $94,050, they may pay zero capital gains tax upon selling the asset. Note that these tax breaks apply to capital gains. Estate taxes are a different story.

The gift tax exclusion allows individuals and married couples to give money to a child and maximize tax efficiency. Individuals can contribute money to a child’s college education or the down payment on a home as a gift. In 2024, the exclusion amount is $18,000 per recipient or $36,000 for married couples engaging in split gifts. With the lifetime federal exclusion set at $13.61 million per person, most individuals can engage in tax-free giving without exceeding their lifetime allowance.

Specific expenditures, such as educational or medical expenses and direct payments to institutions, are excluded from the annual gift limit and lifetime exclusion. This direct payment strategy allows donors to support significant financial obligations, such as college tuition or medical bills, without impacting their gifting allowances. Donors can provide meaningful support to their children and grandchildren while minimizing tax implications.

While maximizing tax-free giving is essential, assessing the broader impact of financial support on recipients is essential. By incorporating gifts into a comprehensive financial plan, donors can align their generosity with their financial objectives and ensure sustainable support for future generations.

Key Tax-Free Giving to Children Takeaways:

Giving to a Child Tax-Free: Take advantage of tax breaks to give to a child in your lifetime.
Giving in Your Lifetime: Maximize the tax advantage of giving money to a child during your lifetime.
Paying for College: Transferring money directly to a child’s college does not impact the gift tax exclusion limit.

Maximizing tax-free giving allows affluent parents to support their children and grandchildren, while minimizing tax liabilities. Implement gifting strategies and consider the broader financial impact to leave a lasting legacy and support loved ones. If you would like to learn more about minimizing taxes in your estate planning, please visit our previous posts.

Reference: Kiplinger (April 10, 2024) “Three Ways to Give to Your Kids Tax-Free While You’re Still Alive,”

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New IRS Tax Rule affects Irrevocable Trusts in Estate Planning

April 19, 2024

Trusts have been foundational estate planning strategies for decades and are becoming more popular as economic shifts and the aging population highlight unique estate planning goals. An irrevocable trust is one practical estate planning strategy for excluding assets from an estate’s taxable value, safeguarding wealth and helping to meet asset threshold limits for government benefits like Medicaid. The Tax Advisor details how the 2023-2 IRS tax rule has significantly impacted estate planning strategies, particularly irrevocable trusts. We look at how this new IRS tax rule affects irrevocable trusts in your estate planning.

Capital gains taxes are the heart of the IRS Rule 2023-2 changes. Individuals pay taxes on the difference between an asset’s purchase price and a higher sell price as that asset’s value grows over time. The original purchase price is their cost basis or non-taxed value. Amounts over the cost basis are taxed as a capital gain. Assets include property, investments, cars and anything providing income or profit. If you create or update an estate plan, the IRS rule may change your estate planning or updates in 2024. Work with an experienced estate planning attorney to find the right type of trust for your goals and structure it accordingly.

The cost basis for an asset’s beneficiaries significantly impacts capital gains taxes once they sell. Capital gains from the deceased’s date of purchase will be much higher than fair market value on the date of death. An irrevocable trust typically gave heirs a break by calculating an inherited asset’s capital gains from the fair market value at the owner’s death. That tax break has changed.

The IRS issued Rule 2023-2 in early 2023, which impacts an inherited asset’s cost basis for capital gains taxes. The cost basis was calculated on the fair market value on the date of death but is based on the deceased’s date of purchase as of March 2023. Calculating taxes from the date of purchase is considered a “step-down,” meaning a lower cost base and higher capital gains. Conversely, the date of death means fair market value at a higher cost basis and less capital gains.

The main differentiator with an irrevocable trust is its ability to exclude assets from an estate’s valuation. The person establishing an irrevocable trust technically no longer owns the assets. This type of trust is a strategy that helps older adults applying for Medicaid benefits meet maximum thresholds.

With the new IRS rule, assets in an irrevocable trust are not part of the owner’s taxable estate at their death and are not eligible for the fair market valuation when transferred to an heir. The 2023-2 rule doesn’t give an heir the higher cost basis or fair market value of the inherited asset. Once they sell that asset, capital gains taxes are calculated using the value when the deceased purchased it.

Families increasingly use irrevocable trusts to safeguard assets from spend-down for government benefits, like Medicaid and VA Aid and Attendance.

Future considerations must include reevaluating how irrevocable trusts are structured to navigate the evolving tax landscape effectively. Planning strategies need to adapt to ensure that assets are protected, and taxes are minimized for the benefit of future generations.

This new IRS tax rule raises important considerations about how it might affect irrevocable trust estate planning. While it may seem like irrevocable trust planning could lead to additional taxes for beneficiaries, the reality is more nuanced. Future considerations in estate planning involve setting up irrevocable trusts that align with new IRS rules. If you would like to learn more about irrevocable trusts, please visit our previous posts.

Reference: The Tax Advisor (Nov. 1, 2023) “Rev. Rul. 2023-2’s Impact on Estate Plans.”

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Do You Pay Taxes on Wedding Gifts?

April 9, 2024

You are a father whose son is getting married. You want to provide a wonderful wedding gift that your son and his bride will cherish and enjoy. Do you pay taxes on wedding gifts? A generous gift for a child’s wedding doesn’t necessarily cause a tax problem unless your lifetime gifts are over the lifetime exclusion limit, which is extremely high right now. A recent article from Yahoo! Finance, “Do I Need to Worry About the Gift Tax If I Pay $60,000 Toward My Daughter’s Wedding?” says most Americans won’t have to worry about the gift tax.

In 2024, the lifetime exclusion is $13.61 million per person and $27.22 million for a married couple. Unless you’ve gone above and beyond these limits, you can make as many gifts as you like to anyone you choose without worrying or paying the 18% to 40% federal gift tax.

But there’s one thing to remember: if you make a gift over the annual gift limit, which is $18,000 per person in 2024 or $36,000 for a married couple, you need to send the IRS Form 709. The form should be submitted even if no gift taxes are due. It’s a simple and smart move.

How do gift taxes work? The federal gift tax doesn’t come into play often. Most gifts are tax-free simply because of the size of both the annual and lifetime gift exclusions. You can gift freely if you keep the limit in mind.

The lifetime exclusion for gift and estate taxes is so high right now that few Americans need to worry about it. If you are generously minded, you may gift $13.61 million (individual) and $27.22 million (married couple). The lifetime exclusion is just as it sounds: the number of gifts you may give during your life or as part of your federal estate.

If you are charitable-minded, you may make many contributions. There are no gift taxes levied on charitable donations, gifts to spouses or dependents, or gifts to political parties. As long as you pay directly to the institutions, there are no taxes on college tuition or healthcare expenses.

There are some strategies to manage the gift tax. One would be to split your $60,000 gift between your daughter and her fiancé. Both gifts would be under the 2024 $36,000 per person exclusion, assuming you are married, so there would not be a gift tax.

Another tactic is to spread the gift out over a few years. Let’s say you’re a single parent. You could gift your daughter and her fiancé $15,000 each this year and next, keeping you below the $18,000 annual gift tax exclusion.

If you’ve already given a gift of $60,000 to your daughter and made gifts over and above the $13.61 million lifetime exclusion, speak with your estate planning attorney to determine where you fall in the gift tax brackets and how much you’ll need to pay.

The easiest way to avoid gift taxes is to pay the vendors directly, but this depends on your overall situation. For instance, where is the money coming from—tax-deferred accounts or investment accounts? It would be wise to talk with your estate planning attorney before making a large gift. Do you pay taxes on wedding gifts? If you have a wedding coming up and are concerned about gift taxes, you can pay the vendors directly rather than giving money directly to the happy couple. If you would like to read more about the gift tax, please visit our previous posts.

Reference: Yahoo! Finance (March 14, 2024) “Do I Need to Worry About the Gift Tax If I Pay $60,000 Toward My Daughter’s Wedding?”

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IRS may End Irrevocable Trust Decanting

March 25, 2024

The term “irrevocable trust” is not quite what it seems, says a recent article from The National Law Review, “Is CCA 202352018 the Death of Irrevocable Trust Decantings?” Generally, they can be modified in one or two ways, depending on the state’s laws. In some states, an irrevocable trust can be modified with the consent of the beneficiaries and the trustees. Some states also require the consent of the settlor if they are living. This is referred to as a “non-judicial modification. ”In other states, an irrevocable trust can be modified by a decanting, a process where an authorized trustee exercises their independent discretion to “pour” over the property of the trust to a new trust with different terms—hence the term decanting. However, the IRS’ Chief Council Advice Memorandum (CCA 202352018) (the “CCA”) means the IRS may end irrevocable trust decantings, as they have been used for years. It’s all about the taxes.

Estate planning attorneys have been concerned that using a non-judicial modification to make changes with the beneficiaries’ consent, such as removing a beneficiary, shifting beneficial interests, or diluting a beneficiary’s interest, might be considered a taxable gift by the beneficiaries. The concern wasn’t present for decantings, since they are effectuated by the independent act of an authorized trustee, who doesn’t have a beneficial interest in the trust without the beneficiaries’ consent – until the CCA.

The CCA Memorandum reviewed a case where, in the first year, an irrevocable inter vivos trust is established for the benefit of a Child and the Child’s descendants, and the trustee may distribute income and principal for the benefit of the child according to the trustee’s discretion. When the Child dies, the remainder will be distributed to the Child’s issue per stirpes.

In year two, when the Child has no living grandchildren or remote descendants, the trustee petitions the state court to modify the terms of the trust. The Child and Child’s issue consent to the modification. Later that year, the State Court grants the petition and issues an order modifying the trust to provide a trustee of the Trust with the power to reimburse the grantor for any income taxes. The grantor pays due to the inclusion of the Trust’s income in the grantor’s taxable income.

The Chief Counsel finds the modification of the irrevocable trust with the consent of the beneficiaries may constitute a taxable gift from the beneficiaries. However, the CCA goes on to say, “[t]he result would be the same if the modification was pursuant to a state statute that provides beneficiaries with a right to notice and a right to object to the modification and a beneficiary fails to exercise their right to object.”

This additional comment from the Chief Counsel is seen as foreshadowing the IRS’ position concerning decanting, and it may prove problematic. Most states currently authorizing trust decanting by statute require the trustee to provide the beneficiaries with notice of the decanting and provide that unless the beneficiaries consent to an earlier effective date, the decanting is only effective after a period of time elapses following the beneficiaries’ receipt of the notice.

It remains to be seen whether this comment from the Chief Counsel will foreclose all possible options for decanting. Decantings are permitted by law in various states, and many estate planning attorneys include provisions in their irrevocable trusts allowing the trustee to decant the trust under the terms of the trust, using the language of an “internal decanting provision.”

Whether the IRS ends the use of irrevocable trust decantings remains to be seen. If you are exploring the possibility of modifying an irrevocable trust, it is always best to speak with an estate planning attorney to review options and possible risks. If you would like to read more about irrevocable trusts, please visit our previous posts.

Reference: The National Law Review (Feb. 29, 2024) “Is CCA 202352018 the Death of Irrevocable Trust Decantings?”

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The Estate of The Union Season 3|Episode 10

The Estate of The Union Season 3|Episode 3 is out now!

March 21, 2024

The Estate of The Union Season 3|Episode 3 is out now! Taxes come in all favors. Sales taxes, excise taxes, capital gains taxes, etc. We are all concerned about our income taxes as we approach April 15th. Many of us will believe we pay way too much, and nobody will feel like they should pay more! But there’s another tax to be concerned about: The Death Tax.

In this edition of The Estate of the Union, Brad Wiewel dissects the Death tax and it’s first cousin, the Gift Tax and explains them in a way that everyone can understand. He also sheds like on what is going to happen on January 1, 2026 – unless Congress changes the law; so, stand by!

In each episode of The Estate of The Union podcast, host and lawyer Brad Wiewel will give valuable insights into the confusing world of estate planning, making an often daunting subject easier to understand. It is Estate Planning Made Simple! The Estate of The Union Season 3|Episode 3 is out now! The episode can be found on Spotify, Apple podcasts, or anywhere you get your podcasts. If you would prefer to watch the video version, please visit our YouTube page. Please click on the links to listen to or watch the new installment of The Estate of The Union podcast. We hope you enjoy it.

Texas Trust Law focuses its practice exclusively in the area of wills, probate, estate planning, asset protection, and special needs planning. Brad Wiewel is Board Certified in Estate Planning and Probate Law by the Texas Board of Legal Specialization. We provide estate planning services, asset protection planning, business planning, and retirement exit strategies.

When Gift Tax Return Should Be Filed

March 20, 2024

Gift tax returns may be the most misunderstood and overlooked part of estate planning. The first mistake people make, according to the article “Know The Most Misunderstood Part Of Estate Plans: Gift Tax Returns” from Forbes, is not knowing when a gift tax return should be filed. Even if a gift you make is tax-free, you might have to file a return anyway. And there are times when you aren’t required to file a gift tax return, but it’s still a good idea to do so.

The gift tax return is IRS Form 709, which can be downloaded from the IRS website at no cost.

In most cases, the IRS can’t take action on an incorrect gift tax return once more than three years have passed since it was originally filed. There are exceptions for fraudulent returns or if a return is either missing information or substantially misstates information.

However, there’s no statute of limitations if you fail to file a gift tax return, and the IRS can raise questions about the transaction at any time. This includes coming after your heirs or your estate after you’ve passed. At that time, your heirs or executor may not have the evidence to prove you complied with the tax law. The IRS would be within its rights to assess not only the gift tax but also penalties and interest for all the years from the date of the gift tax filing to the current date.

For this reason alone, it’s a good idea to file a gift tax return if there’s even the slightest question of whether it’s necessary.

Form 709 has a section for reporting “non-gift transactions.” Some estate planning attorneys recommend taking advantage of this to start the statute of limitations clock ticking and prevent the IRS from recharacterizing your gift years later as a taxable gift.

Consider this especially when you sell assets to a trust or shift assets from one irrevocable trust to another, known as “decanting” a trust. Consider also filing a gift tax return for a non-gift if you take advantage of the generation-skipping transfer tax exemption through a trust.

Another common mistake is not realizing that certain actions are considered gifts by the IRS, whether in the general sense or not. Let’s say you sell an asset to your children at less than market value. The difference between the selling price and the market value is a gift. So is forgiving or making a loan at a below-market interest rate.

If parents pay bills for adult children, this might be considered a gift if the gifts are valuable or if you also make significant gifts of money or property to the same person in the same year.

A gift tax issue the IRS pays close attention to is valuation. There’s not much question about the value of a publicly traded security, but for many other assets, there’s a lot of room to question the correct value, and the gift tax is based on the asset value at the time the gift is made.

While spouses may make unlimited gifts to each other tax-free, there are times when gifts between spouses must be reported. One time is when the gift is defined in the tax code as a “terminable interest.” Another time is if one spouse is not a U.S. citizen. Gifts to that spouse from the other spouse exceeding a certain amount during the year must be reported on IRS Form 709.

It’s always a good idea to check with your estate planning attorney about when a gift tax return should be filed to protect yourself and your heirs. If you would like to read more about gifting and estate planning, please visit our previous posts.

Reference: Forbes (Feb. 16, 2024) “Know The Most Misunderstood Part Of Estate Plans: Gift Tax Returns”

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Crummey Trusts are an Option to Gift to Minors

March 18, 2024

If you’re looking for ways to pass wealth on to children or grandchildren, one valuable tool to consider may be the Crummey Trust. Crummey Trusts represent a strategic option for those looking to gift assets to minors. Named after the first individual to utilize this approach, the Crummey Trust offers a way to gift money to minors while enjoying significant tax advantages and maintaining control over the funds’ distribution.

A Crummey Trust allows you to gift assets to minors without those gifts being subject to gift tax up to a certain amount annually. As of 2024, you can give up to $18,000 annually to a minor through a Crummey Trust without incurring gift tax or affecting your lifetime gift tax exemption. This type of trust is particularly appealing because it prevents the minor from gaining direct access to the funds until they reach an age where they can manage the money responsibly.

A Crummey Trust operates on the concept of “present interest” gifts. For a gift to qualify for the annual gift tax exclusion, the recipient must have the right to use, possess, or enjoy the gift immediately. Crummey Trusts meet this requirement by allowing the beneficiary a temporary right to withdraw the gifted amount, typically within a 30-day window after the gift is made. If the withdrawal right is not exercised, the funds remain in the trust, subject to the terms set by the grantor.

While Crummey Trusts offer many advantages, they also require diligent record-keeping and clear communication with beneficiaries about their rights. Additionally, as beneficiaries age, they may choose to exercise their withdrawal rights, which could impact the grantor’s willingness to continue making gifts to the trust.

Crummey Trusts represent a strategic option for those looking to gift assets to minors while maintaining control over the distribution of those assets and optimizing tax benefits. By understanding the unique features and requirements of Crummey Trusts, you can make informed decisions that align with your estate planning goals and provide for your loved ones’ futures. If you would like to learn more about gifting, please visit our previous posts.

Reference: ElderLawAnswers “Crummey Trust: A Safe Way to Give Financial Gifts to Minors”

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Use Qualified Disclaimer to Avoid Inheriting IRA

March 5, 2024

The rules governing inherited Individual Retirement Accounts (IRAs) have changed over the years. They have become even more complex since the passage of the original SECURE Act. The inheritor of an IRA may be required to empty the account and pay taxes on the resulting income within 10 years. In some situations, beneficiaries might choose to use a Qualified Disclaimer to avoid inheriting the IRA, according to a recent article, “How to Opt Out of Inheriting an IRA” from Think Advisor.

Paying taxes on the distributions could put a beneficiary into a higher tax bracket. In some situations, beneficiaries may want to execute a Qualified Disclaimer and avoid inheriting both the account and the tax consequences associated with the inheritance.

Individuals who use a Qualified Disclaimer are treated as if they never received the property at all. Of course, you don’t enjoy the benefits of the inheritance but don’t receive the tax bill.

Suppose the decedent’s estate is large enough to trigger the federal estate tax. In that case, generation-skipping transfer tax issues may come into play, depending on whether there are any contingent beneficiaries.

An experienced estate planning attorney is needed to ensure that the disclaimer satisfies all requirements and is treated as a Qualified Disclaimer. It must be in writing, and it must be irrevocable. It also needs to align with any state law requirements.

The person who wishes to disclaim the IRA must provide the IRA custodian or the plan administrator with written notice within nine months after the latter of two events: the original account owner’s death or the date the disclaiming party turns 21 years old. The disclaiming person must also execute the disclaimer before receiving the inherited IRA or any of the benefits associated with the property.

Once you use the qualified disclaimer to avoid inheriting the IRA, it must pass to the remaining beneficiaries without the disclaiming party’s involvement. The disclaiming party cannot directly decide who will receive their interests, such as directing the inherited IRA to go to their child. If the disclaiming party’s child is already named as a beneficiary, their interest will be received as intended by that child.

The person inheriting the account must execute the disclaimer before receiving any benefits from the account. Even electing to take distributions will prevent the disclaimer from being effective, even if the person has not received any funds.

In some cases, you may be able to disclaim a portion of the inherited IRA. However, these are specific cases requiring the experience of an estate planning attorney. If you would like to learn more about inherited IRAs, please visit our previous posts.

Reference: Think Advisor (Feb. 8, 2024) “How to Opt Out of Inheriting an IRA”

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Category: Tax Planning

Understanding the differences between ABLE Account and Special Needs Trust

Key Estate Planning Strategies for Executives

Maximizing Tax-Free Giving to Children

New IRS Tax Rule affects Irrevocable Trusts in Estate Planning

Do You Pay Taxes on Wedding Gifts?

IRS may End Irrevocable Trust Decanting

The Estate of The Union Season 3|Episode 3 is out now!

When Gift Tax Return Should Be Filed

Crummey Trusts are an Option to Gift to Minors

Use Qualified Disclaimer to Avoid Inheriting IRA

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