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Financial Planning Tips and Fact vs. Fiction

Financial Planning Tips

Test Your Estate Planning Vocabulary
(Updated: 05/08/2017)

Which of the words below most accurately corresponds to the following definition?

Definition: A refusal to accept property or assets that meets certain tax code provisions, allowing the property to be treated as though it had never been received by the intended beneficiary.

  1. Qualified denial
  2. Refused interest
  3. Qualified disclaimer
  4. Contingent refusal


Answer: C.

Internal Revenue Code Section 2518 permits the beneficiary of an estate, trust, or certain other financial assets to make a qualified disclaimer, essentially refusing to accept all or part of the property. By doing so, the primary beneficiary can avoid paying taxes on the assets and ensure that they pass to another named beneficiary.

To be valid, a qualified disclaimer needs to meet the following four criteria:

  1. The disclaimer must be in writing.
  2. The disclaimer must be received by the original property owner's executor within nine months of the date of the transfer.
  3. The beneficiary may not have benefited from the property in any way.
  4. The property must pass to someone other than the person making the qualified disclaimer.
It's important to note that you have no control over disclaimed assets; you cannot direct how the property is distributed. Instead, the disclaimed property will pass according to the original owner's instructions (i.e., to the next named beneficiary).

 

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Fact vs. Fiction

We understand that it can be tricky navigating the world of personal finance. Everyone seems to have an opinion, and it can be hard to know what to believe. We created this series as a way to present and debunk some of the most common financial myths.



Fiction: Owning a second home is no different than owning one property—the costs are the same.

Fact: In addition to the down payment on your home-away-from-home and the possibility of having to pay two mortgages, a second residential property may come with other costs you haven't considered, such as car insurance. (Florida, for instance, requires anyone staying there for more than 90 days to meet its minimum insurance requirements.) It's also important to think about utilities and maintenance. Your primary house still needs attention even if you spend months away from it. Other costs to consider are property taxes, furnishings, association fees, management fees if you rent your property when you're not there, and travel costs when you fly or drive between homes.


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Last Updated: 05/15/2017




 





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