95 / May a life insurance beneficiary make a qualified disclaimer of an amount equal to the beneficiary’s proportionate share of death taxes when the decedent directed that death taxes be paid entirely out of the probate estate?

Yes.

In Estate of Boyd v. Commissioner,¹ in an unusual factual situation, the decedent’s son was left the decedent’s entire probate estate, $153,000, under decedent’s will plus $389,000 of life insurance proceeds as the policy beneficiary. The decedent’s second wife (the son’s step-mother) received nothing. The decedent’s will directed his executor to pay out of the probate estate the tax (an estimated $78,000) allocable to the life insurance proceeds. The son disclaimed the entire probate estate and any right to have the probate estate pay any death tax attributable to the life insurance proceeds. The IRS refused to give effect to the second disclaimer, which had the effect of reducing the amount of marital deduction the estate claimed. The disclaimer statute says that a qualified disclaimer means an irrevocable and unqualified refusal to accept an interest in property. The court recognized the subject of the second disclaimer as an interest in property for purposes of the statute and allowed the claimed marital deduction.

---

Planning Point: Remember that under IRC Section 2518 and many state statutes, a disclaimer is qualified only if (among several other requirements) no portion of the disclaimed interest passes to the disclaiming party as a result of the disclaimer. It is important to consider where the disclaimed interest passes after the disclaimer is made.

---