Intestacy and filing disclaimers

My grandfather, also a PA resident, passed away earlier this month and left no will. He and my grandmother (still living) held accounts jointly as well as separately. Because he died intestate, his personal accounts will be divided between my grandmother and the three children. The children do not want the money and would rather let my grandmother keep it. If they each file a disclaimer, does the money go to my grandmother or to myself and my cousins? If transferred to my grandmother, is this amount free of Federal and State estate tax? If not, is it subject to gift tax if it exceeds the annual limit? Even if it is subject to inheritance tax, would disclaimer still be an option to avoid the gift tax of a subsequent transfer to my grandmother? Thanks in advance!

Pittsburgh, PA -

Attorney Answers (2)

Steven J. Fromm

Steven J. Fromm

Estate Planning Attorney - Philadelphia, PA
Answered

If the children disclaim, their money will go downstream as if they predeceased; it will not go to grandma. The only solution is for the recipients to make gifts to her. Individuals can make annual gifts of present interests of $13,000 per year, and their spouse can join in the gift for another $13,000. So each child could make either a $13,000 or $26,000 gift to her each year. If each child is married, they could make gifts of $26,000 in 2010 and then in January another 26,000. So in 4 months time they could each gift $52,000 without a gift tax impact. If more is gifted in any one year, the child would use up part of their $1,000,000 lifetime gift exclusion. You should really go over the situation with a qualified estates attorney in PA.

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Margaret L. Cross

Margaret L. Cross

Estate Planning Attorney - Waltham, MA
Answered

The legal effect of a Disclaimer is that the person disclaiming is deemed to have predeceased the decedent.
According to 20 Pa. CS. section 2102
§ 2102. Share of surviving spouse.
The intestate share of a decedent's surviving spouse is:
(1) If there is no surviving issue or parent of the
decedent, the entire intestate estate.
(2) If there is no surviving issue of the decedent but
he is survived by a parent or parents, the first $30,000 plus
one-half of the balance of the intestate estate.
Notwithstanding the foregoing, in the case of a decedent who
died as a result of the terrorist attacks of September 11,
2001, a surviving spouse shall be entitled to 100% of any
compensation award paid pursuant to the Air Transportation
Safety and System Stabilization Act (Public Law 107-42, 115
Stat. 230).
(3) If there are surviving issue of the decedent all of
whom are issue of the surviving spouse also, the first
$30,000 plus one-half of the balance of the intestate estate.
(4) If there are surviving issue of the decedent one or
more of whom are not issue of the surviving spouse, one-half
of the intestate estate.
(5) In case of partial intestacy any property received
by the surviving spouse under the will shall satisfy pro
tanto the $30,000 allowance under paragraphs (2) and (3).

Therefore it is not enough for only the children to diclaim, all the issue must disclaim. Your family should consult with an estate planning attorney in your area, especially if your family is concerned over estate taxes and gift taxes.
In order for a disclaimer to not have adverse gift tax consequences, the disclaimer must comply with the Internal Revenue Code's requirements for the disclaimer to be a "Qaulified Disclaimer."

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