Probate & Trust Law Section Conference Manual ... - Minnesota CLE

formula similar to the one used inWandry can be a prudent way to describe the disclaimed
portion of a hard-to-value asset.
B. The Christiansen Case
In Christiansen, Christine Christiansen Hamilton, the decedent’s only child, and the executor
of the decedent’s estate, disclaimed her interest in the estate “as finallydetermined for federal
estate tax purposes” as to all amounts over $6.35 million. The decedent’s Will provided that
twenty-five percent of anydisclaimed amounts were to go to a charitable foundation. The
Commissioner denied the estate’s claimed charitable deduction for amounts passing to the
foundation as a result of the disclaimer maintaining that the parties’ agreed-upon adjustment
to the valuation of certain partnership interests served as post-death, postdisclaimercontingencies
that disqualified the disclaimer under Code §2518 and
TreasuryRegulation §20.2055-2(b)(1). The Tax Court disagreed with the Commissioner and
allowed the charitable deduction for the amounts passing to the foundation as a result of the
partial disclaimer.
Before the 8 th Circuit, the Commissioner argued that formula disclaimers that have the
practical effect of disclaiming all amounts above a fixed-dollaramount should be disallowed.
According to the Commissioner, disclaimers such as the one made by the decedent’s daughter
fail to preserve a financialincentive for the Commissioner to audit an estate tax return
becausewith such a disclaimerany post-challenge adjustment to the value of an estate would
consist entirely of anincreased charitable donation. The Commissioner argued such
disclaimersshould be categorically disqualified as against public policy because there would
be no possibility ofenhanced tax receipts as an incentive for the Commissioner to audit the
return andensure accurate valuation of the estate,
The 8th Circuit Court of Appeals affirmed the Tax Court and held that the disclaimer executed
by the decedent’s daughter was a valid partial disclaimer of a fixed dollar amount. The Court
held that references to value “as finallydetermined for estate tax purposes” were not
references that were dependent upon post-deathcontingencies that would disqualify a
disclaimer. Because the only uncertainty at the time of the disclaimer was the calculation of
the value to be placed on the foundation’s right to receivetwenty-five percent of the estate in
excess of $6.35 million, and because no post-deathevents outside the context of the valuation
process were alleged as post-deathcontingencies, the disclaimerwas a qualified disclaimer.
Responding to the Commissioner’s assertion that a disclaimer of all amounts above a fixeddollaramount
should be disallowed as against public policy, the Court declared that the
Commissioner’s role is not merely to maximize taxreceipts and conduct litigation based on a
calculus as to which cases will result in thegreatest collection; the Commissioner’s role is to
enforce the tax laws. The Court stated it wasn’t necessary for the Commissioner to serve as a
watchdog against the under-valuations of the disclaimed assets because with a fixed-dollaramount
partial disclaimer, the contingentbeneficiaries taking the disclaimed property have an
interest in ensuring that theexecutor or administrator does not under-report the estate’s value.
Consequently, a partial disclaimer of a fixed pecuniary amount above a specified dollar
amount is valid under the disclaimer regulations and does not contravene public policy.
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