Trusts and Inheritance Tax

Disclaiming a gift

Produced by Tolley
  • 23 Mar 2022 10:39

The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Disclaiming a gift
  • The general law and disclaimers
  • Inheritance tax and disclaimers
  • Inheritance tax and disclaimer of an interest in settled property
  • Capital gains tax and disclaimers
  • Income tax and disclaimers
  • Stamp taxes and disclaimers

Disclaiming a gift

The general law and disclaimers

If a beneficiary of a gift under a Will or intestacy refuses it before acceptance, this amounts to a disclaimer. The property then devolves to the person(s) next entitled according to the terms of the Will or intestacy and so, unlike a variation, it is not possible for the person disclaiming to redirect the property or control its ultimate destination.

An effective disclaimer operates as an avoidance of a gift rather than as a disposition which re-directs the subject matter to someone else. Before disclaiming, it is important to find out what the effect will be. As a general rule, if a specific gift or legacy in a Will is disclaimed, it will fall into residue and the beneficiaries of the residuary estate will take the disclaimed gift in the appropriate shares.

If a gift of residue is disclaimed and the Will includes a substitutional gift in the event of failure of the gift for any reason, the disclaimed share passes according to those provisions. If there is no effective substitutional gift, the disclaimed share of residue will be treated as a partial intestacy. It follows that if a gift of the whole estate is disclaimed, full intestacy ensues.

Care must be taken, however, to be aware of the effect of the Wills Act 1837, s 33. If any child should predecease the testator leaving children of their own, the gift will pass to those children (ie the testator’s grandchildren). This could operate where a

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