An estate plan disclaimer is a unique strategy that could allow you and your family to maximize your charitable giving and the impact of the assets you will one day leave behind. 

Estate planning includes deciding who — whether individuals or charities — will receive gifts, inheritances, or other bequests from your estate. When someone is named to receive something, it’s generally assumed they’ll accept it unless they choose to decline. That decision to decline is known as a “disclaimer.” When developing your estate plan, you can decide that if your heirs do disclaim an inheritance or gift, the assets will go to a charity of your choice. 

Scott Adams, a partner with the Bradley Arant law firm in Birmingham who has 24 years of experience and specializes in estate planning, gives an example of how this might work: 

“A client could give a gift of a percentage of his or her estate or a certain dollar amount to a family member but also add a specific provision into the will that says if the family member disclaims this gift, then it goes to the Community Foundation, to be added to the family’s donor-advised fund.” 

Disclaimers can make estate planning more flexible, giving beneficiaries or executors room to handle unexpected situations, like changes in tax laws or shifts in the financial needs of the people involved. Though the estate tax exemption is at an all-time high of $13.6 million in 2024, an individual inheriting a large amount of assets might disclaim a gift to avoid the 40% estate tax rate. 

“So, the recipient would have a choice,” Adams explains. “They could either accept the gift and pay a 40% estate tax on the amount that exceeds the estate tax exemption, or they could disclaim that and get a charitable estate tax deduction, if the will includes the specific provision directing that any disclaimed assets go to the Community Foundation.” 

That way, the charity named in the disclaimer would receive much more money than if the heir claimed the assets, paid the estate tax on those assets, and then donated the funds. 

One stipulation of this strategy is that the disclaimed assets must pass without any guidance from the original beneficiary. That means disclaimed assets could not fund a private foundation operated by your children who disclaimed the inheritance. Instead, your will would state which charities would receive the disclaimed assets. 

Through the Community Foundation of Greater Birmingham, however, your family could still play a part in helping to bring your philanthropic vision to life through a donor-advised fund.  While legally your family members could not make direct decisions about which charities received money from your donor-advised fund, they can make grant recommendations in support of the causes you care about most. 

“That’s the advantage of using the Community Foundation — that you get to stay involved,” Adams says. While a disclaimer strategy is typically only considered by his clients with a large amount of assets, Adams believes it’s a great option for those who want to use their wealth to make a difference but still need flexibility for their heirs. 

“The nice thing about it is that you’re not locking in a decision,” Adams says. “You’re just setting the table for the option for the recipient to make the decision later based on whatever the circumstances are at that time.” 

Learn more about leaving a lasting legacy by visiting Give Tomorrow or contact George Gaskin at ggaskin@cfbham.org.