George Fox University: Disclaimers and Alternative Charitable Bequests

This site requires JavaScript to be enabled for all features to work correctly. Please email the webmaster if you have any questions.

Disclaimers and Alternative Charitable Bequests
Preparing one's estate plan is one of the most important steps you can take on behalf of you and your family. Keeping your estate plan current is equally important.

It is best to plan ahead as much as possible so that family members do not need to make difficult decisions soon after your passing, but you can't anticipate everything. It may be important to include a means in your estate plan that would help your family deal with things that were left undone or didn't work as anticipated.

Disclaimers can be used advantageously to benefit family members and charities as part of your estate plan. Disclaimers can be an effective tool to help mitigate inadequate estate planning or provide estate planning opportunities after a person has died.

A disclaimer may be used in conjunction with an alternative charitable bequest. As a general rule, every will should contain one or more alternative charitable bequests. If an individual makes a qualified disclaimer of a bequest and the bequest property passes under an alternative bequest provision to a charitable organization, the decedent's estate will be allowed a deduction for the amount passing to charity. Furthermore, if the disclaimed property is income in respect of a decedent such as U.S. savings bonds, income taxes will be avoided, as well.

A quailed disclaimer allows a beneficiary to renounce a bequest without being subject to transfer tax consequences. When a beneficiary makes a qualified disclaimer, the property interest is deemed never to have passed to the disclaimant. With an alternative charitable bequest in place, the property would then pass directly to the charity, possibly saving administrative costs and taxes.

Example: Anne has established her estate plan and provided bequests to family members and charities that were especially meaningful to her. She has established a scholarship endowment fund at George Fox University that she would like to increase significantly. She would like more of her assets to be added to the scholarship fund, but only if her family members are agreeable to her desires. So her will provides that any part of a bequest disclaimed by a family member shall go to the scholarship endowment fund. As part of her estate she has some U.S. savings bonds. She realizes that if those savings bonds are transferred to a person, they are subject to income tax. However, if the recipient disclaims those savings bonds, they will go directly to George Fox for the scholarship fund and not be subject to income tax.

Another use of alternative charitable bequest clauses is to cover the possibility that all one's intended beneficiaries predecease, or the possibility that the testator and his or her intended beneficiaries are killed in a common disaster, such as an auto accident or plane crash. Property passing to charity under an alternative bequest in either of these situations also qualifies for the estate tax charitable deduction.

The disclaimer is irrevocable and must be made in writing. The disclaimer must describe the interest being disclaimed and include the signature of the disclaimant. The disclaimer must be received by the estate's personal representative within nine months after the interest in the property has been determined (generally the date of death). The disclaimant can't accept any benefits from the property.

Disclaimers can provide a second look at an estate plan after all the facts are known. Sometimes they can save taxes. Sometimes disclaimers can provide a means to correct errors that were made in an estate plan.

For more helpful estate planning insights, contact Al Zimmerman, director of planned giving, 503-554-2106 or azimmerman@georgefox.edu.

George Fox University | Office of Development | Estate and Planned Giving | Disclaimers and Alternative Charitable Bequests