Will you need to manage your parents’ assets for them? Do you have authority to represent them when they cannot attend to that task for themselves? Is it time to place assets in a trust to avoid the public records generated by guardianships and probate administration? Do you already possess the required authority to transfer assets to a trust for their benefit without their signature? All of these things often become issues that should be discussed and planned. A coherent plan provides benefits that address each of these questions.
Issues about inheriting from parents – If you are expecting a substantial inheritance from your parents it may be prudent to discuss several issues. Taking into account all of your resources and the things they will be applied to, we should discuss the potential future use of a “disclaimer” – a written refusal to receive property left to you. Why would you do that? As one example, a qualified disclaimer can successfully transfer assets directly away from you and into the hands of other persons with no gift tax liability to you. Planning for a potential disclaimer requires that you also plan to meet the technical requirements provided in the Internal Revenue Code.
There can be other reasons to disclaim inheritances. For example, where a parent’s scheme of disposition would place assets in a trust for you, and then to your children, you might consider disclaiming the interest to provide immediate benefits for the children. There is no hurry in these matters because disclaimers require signing and delivery within nine months of the date of death or date of gift. However, you cannot execute a “qualified disclaimer” where you first accepted benefits and then later decided to pass interests to the next generation. There are some things you should know about the requirements in order to avoid inadvertently making it impossible to disclaim without facing a transfer that will be taxable to you. If you first accept benefits and then later attempt a disclaimer, it is treated as a gift from you to the recipients and you are required to report that gift to the IRS. It may prove very beneficial for you to learn about these things before the potential opportunity to make mistakes comes along.
Also, consideration must be given to establishing trusts to hold parents’ assets. Trusts will operate to manage assets and apply all property strictly for the benefit of the parents. Using trusts to accomplish that kind of protection can be a superior alternative to a guardianship. Guardianships can result in full and detailed public disclosure of assets that trusts can avoid. See Trusts: Avoid Public Disclosure of Assets.
Got questions? You can Ask Me.