How One POD Beneficiary Can Disclaim Inheritance

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LeeInTN
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How One POD Beneficiary Can Disclaim Inheritance

Post by LeeInTN » Wed Feb 19, 2020 9:59 am

Simple Bank Account/CD with POD listing multiple adult children. One child wishes to disclaim her portion and allow hers to pass to siblings equally. Is this simple or complicated?

NotWhoYouThink
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by NotWhoYouThink » Wed Feb 19, 2020 11:07 am

Just for clarification, is the POD to "Bob and Carol and Ted and Alice" or "My children, per stirpes" or some other designation?

And is this Tennessee?

johnnyc321
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by johnnyc321 » Wed Feb 19, 2020 11:12 am

This will depend on the way the POD is written and also on the account agreement. It most likely will go to the others named but this should be verified with the institution holding the account before any disclaimers are signed. Disclaimers are normally irrevocable.

Gill
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by Gill » Wed Feb 19, 2020 11:14 am

How big is this bank account? Unless it's quite large just withdraw the funds and split it among all the others. I don't see where you need a formal disclaimer unless there are gift tax ramifications involved. In other words, if there are four children with only three accepting the transfer and the account is $30,000 just have those three take $10,000 each. The fourth is in effect making a gift of $7,500 total to the others but no problem with that.

In this example, there would be no gift reporting required until the amount of the transfer to the remaining three exceeded $45,000. If the amount disclaimed is greater than that just file a gift tax return.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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LeeInTN
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by LeeInTN » Wed Feb 19, 2020 12:54 pm

NotWhoYouThink wrote:
Wed Feb 19, 2020 11:07 am
Just for clarification, is the POD to "Bob and Carol and Ted and Alice" or "My children, per stirpes" or some other designation?

And is this Tennessee?
Yes, this is Tennessee. The POD names each person individually with SSN but doesn't actually state relationship. All are surviving sibs with same two parents.

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LeeInTN
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by LeeInTN » Wed Feb 19, 2020 12:57 pm

Gill wrote:
Wed Feb 19, 2020 11:14 am
How big is this bank account? Unless it's quite large just withdraw the funds and split it among all the others. I don't see where you need a formal disclaimer unless there are gift tax ramifications involved. In other words, if there are four children with only three accepting the transfer and the account is $30,000 just have those three take $10,000 each. The fourth is in effect making a gift of $7,500 total to the others but no problem with that.

In this example, there would be no gift reporting required until the amount of the transfer to the remaining three exceeded $45,000. If the amount disclaimed is greater than that just file a gift tax return.
Gill
It's around $300K from what I'm told. There are three names on the POD, so the disclaimant will pass about $50K to each of the other two. Can the financial institution (local bank) do this without a formal legal doc; or use a standard internal bank doc?

student
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by student » Wed Feb 19, 2020 1:10 pm

LeeInTN wrote:
Wed Feb 19, 2020 12:57 pm
Gill wrote:
Wed Feb 19, 2020 11:14 am
How big is this bank account? Unless it's quite large just withdraw the funds and split it among all the others. I don't see where you need a formal disclaimer unless there are gift tax ramifications involved. In other words, if there are four children with only three accepting the transfer and the account is $30,000 just have those three take $10,000 each. The fourth is in effect making a gift of $7,500 total to the others but no problem with that.

In this example, there would be no gift reporting required until the amount of the transfer to the remaining three exceeded $45,000. If the amount disclaimed is greater than that just file a gift tax return.
Gill
It's around $300K from what I'm told. There are three names on the POD, so the disclaimant will pass about $50K to each of the other two. Can the financial institution (local bank) do this without a formal legal doc; or use a standard internal bank doc?
If there is a lot of paperwork, one can always just gift the money over 4 years.

Gill
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by Gill » Wed Feb 19, 2020 3:38 pm

LeeInTN wrote:
Wed Feb 19, 2020 12:57 pm
Gill wrote:
Wed Feb 19, 2020 11:14 am
How big is this bank account? Unless it's quite large just withdraw the funds and split it among all the others. I don't see where you need a formal disclaimer unless there are gift tax ramifications involved. In other words, if there are four children with only three accepting the transfer and the account is $30,000 just have those three take $10,000 each. The fourth is in effect making a gift of $7,500 total to the others but no problem with that.

In this example, there would be no gift reporting required until the amount of the transfer to the remaining three exceeded $45,000. If the amount disclaimed is greater than that just file a gift tax return.
Gill
It's around $300K from what I'm told. There are three names on the POD, so the disclaimant will pass about $50K to each of the other two. Can the financial institution (local bank) do this without a formal legal doc; or use a standard internal bank doc?
I don't see how the bank needs to be involved at all. Have them issue the three checks and then the gifts can be made to the other two. You can ask the bank if they will just issue the two checks. I'm not aware of any formal procedure to disclaim POD accounts.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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LeeInTN
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by LeeInTN » Wed Feb 19, 2020 3:58 pm

If the bank will just issue the checks directly to the heirs, then this is all inheritance and all is well.

If the disclaimant is required to take possession and gift the extra to the others, then that could be problematic due to gifting limits.

Will a bank simply take the direction of the disclaimant that she doesn't want her portion - and disburse her share to the other two?

Gill
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by Gill » Wed Feb 19, 2020 4:06 pm

LeeInTN wrote:
Wed Feb 19, 2020 3:58 pm
If the bank will just issue the checks directly to the heirs, then this is all inheritance and all is well.

If the disclaimant is required to take possession and gift the extra to the others, then that could be problematic due to gifting limits.

Will a bank simply take the direction of the disclaimant that she doesn't want her portion - and disburse her share to the other two?
What "gifting limits" are you concerned about? Is there a possibility the disclaimant may have an estate exceeding $11.5 million? I'd ask the bank. They very well may issue the checks to the remaining two.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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LeeInTN
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by LeeInTN » Wed Feb 19, 2020 4:45 pm

Gill wrote:
Wed Feb 19, 2020 4:06 pm
LeeInTN wrote:
Wed Feb 19, 2020 3:58 pm
If the bank will just issue the checks directly to the heirs, then this is all inheritance and all is well.

If the disclaimant is required to take possession and gift the extra to the others, then that could be problematic due to gifting limits.

Will a bank simply take the direction of the disclaimant that she doesn't want her portion - and disburse her share to the other two?
What "gifting limits" are you concerned about? Is there a possibility the disclaimant may have an estate exceeding $11.5 million? I'd ask the bank. They very well may issue the checks to the remaining two.
Gill
No concern about inheritance limits, but there could be concern about the disclaimant gifting her sibs $50K each if the dollars aren't technically inheritance i.e. if she takes possession it is her money that she then gives to her sibs. Avoiding possession is important, no? What's the best vehicle to direct the bank to give her portion to her sibs while not placing the bank in a position of arbiter?

Gill
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by Gill » Wed Feb 19, 2020 4:56 pm

LeeInTN wrote:
Wed Feb 19, 2020 4:45 pm
No concern about inheritance limits, but there could be concern about the disclaimant gifting her sibs $50K each if the dollars aren't technically inheritance i.e. if she takes possession it is her money that she then gives to her sibs. Avoiding possession is important, no? What's the best vehicle to direct the bank to give her portion to her sibs while not placing the bank in a position of arbiter?
I'm trying to help you avoid a disclaimer because it's not clear from the facts that if one party disclaims it goes to the other two. Perhaps under state law or the contract with the bank it goes to the disclaimants issue (children, grandchildren, etc.) I'm suggesting legally take possession of the account and then make a clear gift to the others. So what if a gift tax return is required - no big deal.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

bsteiner
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by bsteiner » Wed Feb 19, 2020 5:05 pm

LeeInTN wrote:
Wed Feb 19, 2020 9:59 am
Simple Bank Account/CD with POD listing multiple adult children. One child wishes to disclaim her portion and allow hers to pass to siblings equally. Is this simple or complicated?
It's not difficult. We do disclaimers in a significant portion of the estates we handle. The law firm handing the estate should be able to do it. The filing and service requirements vary from state to state, but the law firm should be familiar with the procedures in the decedent's home state.

The person disclaiming can't say how the disclaimed portion goes. Unless the POD designation provides otherwise, the disclaimed portion goes as if the person disclaiming died first. If the POD designation provides otherwise (for example, if it says to A if A survives, otherwise to B, but if A survives and disclaims then to C), then the POD designation controls and it would go to C rather than to B).

DIFAR31
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by DIFAR31 » Wed Feb 19, 2020 5:08 pm

bsteiner wrote:
Wed Feb 19, 2020 5:05 pm
Unless the POD designation provides otherwise, the disclaimed portion goes as if the person disclaiming died first.
Does this mean that the disclaimed amount would become part of the residuary?

Gill
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by Gill » Wed Feb 19, 2020 5:12 pm

bsteiner wrote:
Wed Feb 19, 2020 5:05 pm
The person disclaiming can't say how the disclaimed portion goes. Unless the POD designation provides otherwise, the disclaimed portion goes as if the person disclaiming died first. If the POD designation provides otherwise (for example, if it says to A if A survives, otherwise to B, but if A survives and disclaims then to C), then the POD designation controls and it would go to C rather than to B).
Bruce, I haven't been clear where the disclaimed share goes in this case which is why I was suggesting a simple gift. I don't believe the OP knows either. It may not be to the other siblings.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by Gill » Wed Feb 19, 2020 5:14 pm

DIFAR31 wrote:
Wed Feb 19, 2020 5:08 pm
bsteiner wrote:
Wed Feb 19, 2020 5:05 pm
Unless the POD designation provides otherwise, the disclaimed portion goes as if the person disclaiming died first.
Does this mean that the disclaimed amount would become part of the residuary?
This isn't clear from the facts given by the OP. It's not necessarily.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

bsteiner
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by bsteiner » Wed Feb 19, 2020 5:17 pm

DIFAR31 wrote:
Wed Feb 19, 2020 5:08 pm
bsteiner wrote:
Wed Feb 19, 2020 5:05 pm
Unless the POD designation provides otherwise, the disclaimed portion goes as if the person disclaiming died first.
Does this mean that the disclaimed amount would become part of the residuary?
Unless the POD designation has a different provision, it would go as if the person disclaiming died first.

For example, if the POD designation says to such of A, B and C who survive the depositor and A dies first, it would go to B and C. If it says to A if A survives the depositor or if not then to B if B survives, it would go to B. If it says to A, B and C but if any of them dies first then his/her share goes to his/her issue, and A disclaims, A's share goes to A's issue. If it says to A if A survives or if not then to B but if A survives and disclaims then to C. If it just says A and A disclaims then it reverts to the estate.

What does this one say?

Gill is correct that if the amount is modest and it's not clear what the POD designation says, then the person could simply take his/her share and give it away with annual exclusion gifts (or even some taxable gifts if the estate tax isn't a concern). That's often the practical solution for modest amounts (or for retirement benefits if they would otherwise fall into the estate).

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LeeInTN
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by LeeInTN » Wed Feb 19, 2020 5:41 pm

Thanks for the clarifications of the options. This has been helpful. I'll ask the folks involved to check with the specifics on how the POD is written at the bank holding the assets. The upcoming heirs will need to understand the necessity of modifying the POD language if necessary; or just spacing/timing of gifts after the fact (if "A" takes possession). The estate will be small, with these dollars comprising more than 90% of the assets. No probate. No law firm.

Katietsu
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by Katietsu » Wed Feb 19, 2020 6:04 pm

Bsteiner and gill are the experts. Obviously follow all the due diligence they addressed. I will just add that I was in this situation with a bank account when my father died. My siblings and I were listed as 4 equal beneficiaries. We had 2 siblings disclaim. The bank would not provide a form as they said it was a legal document that I had to get a lawyer to produce. I googled it and found a three sentence disclaim form online. Made two copies. Had it signed by the two disclaiming. Bank issued two checks splitting the cash between the other two siblings.

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LeeInTN
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by LeeInTN » Wed Feb 19, 2020 6:25 pm

Katietsu wrote:
Wed Feb 19, 2020 6:04 pm
Bsteiner and gill are the experts. Obviously follow all the due diligence they addressed. I will just add that I was in this situation with a bank account when my father died. My siblings and I were listed as 4 equal beneficiaries. We had 2 siblings disclaim. The bank would not provide a form as they said it was a legal document that I had to get a lawyer to produce. I googled it and found a three sentence disclaim form online. Made two copies. Had it signed by the two disclaiming. Bank issued two checks splitting the cash between the other two siblings.
Great news - thank you!

Gill
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by Gill » Wed Feb 19, 2020 6:37 pm

LeeInTN wrote:
Wed Feb 19, 2020 6:25 pm
Katietsu wrote:
Wed Feb 19, 2020 6:04 pm
Bsteiner and gill are the experts. Obviously follow all the due diligence they addressed. I will just add that I was in this situation with a bank account when my father died. My siblings and I were listed as 4 equal beneficiaries. We had 2 siblings disclaim. The bank would not provide a form as they said it was a legal document that I had to get a lawyer to produce. I googled it and found a three sentence disclaim form online. Made two copies. Had it signed by the two disclaiming. Bank issued two checks splitting the cash between the other two siblings.
Great news - thank you!
You still need to know what the POD provides in the event one beneficiary predeceases
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

TropikThunder
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by TropikThunder » Wed Feb 19, 2020 7:04 pm

LeeInTN wrote:
Wed Feb 19, 2020 4:45 pm
No concern about inheritance limits, but there could be concern about the disclaimant gifting her sibs $50K each if the dollars aren't technically inheritance i.e. if she takes possession it is her money that she then gives to her sibs.
I don't think I'm alone here, but I don't see where your concern is coming from re: gifting. There's nothing wrong with giving other people money, certainly not family members. You say there is "no concern about inheritance limits", so it doesn't matter that the $50k gift exceeds the annual exclusion amount of $15k per person.
LeeInTN wrote:
Wed Feb 19, 2020 4:45 pm
Avoiding possession is important, no?
No, it's not important unless she routinely gives her siblings so much money above the annual exclusion that she bumps up against the lifetime estate limit. It doesn't matter that the would-be disclaimant takes physical possession of the money and then gifts it to her siblings. Sure, the giver will need to fill out Form 709 since the amount exceeds the annual exclusion, but that is just a record-keeping form to track how much of the $5.6M lifetime exclusion has been used. No tax is due.

I agree with Gill, just have her take the money and give it to her siblings. The bank doesn't need to do anything for her.

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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by Gill » Wed Feb 19, 2020 7:10 pm

TropikThunder wrote:
Wed Feb 19, 2020 7:04 pm
LeeInTN wrote:
Wed Feb 19, 2020 4:45 pm
No concern about inheritance limits, but there could be concern about the disclaimant gifting her sibs $50K each if the dollars aren't technically inheritance i.e. if she takes possession it is her money that she then gives to her sibs.
I don't think I'm alone here, but I don't see where your concern is coming from re: gifting. There's nothing wrong with giving other people money, certainly not family members. You say there is "no concern about inheritance limits", so it doesn't matter that the $50k gift exceeds the annual exclusion amount of $15k per person.
LeeInTN wrote:
Wed Feb 19, 2020 4:45 pm
Avoiding possession is important, no?
No, it's not important unless she routinely gives her siblings so much money above the annual exclusion that she bumps up against the lifetime estate limit. It doesn't matter that the would-be disclaimant takes physical possession of the money and then gifts it to her siblings. Sure, the giver will need to fill out Form 709 since the amount exceeds the annual exclusion, but that is just a record-keeping form to track how much of the $5.6M lifetime exclusion has been used. No tax is due.

I agree with Gill, just have her take the money and give it to her siblings. The bank doesn't need to do anything for her.
The lifetime exclusion is now $11.58 million.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

TropikThunder
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by TropikThunder » Wed Feb 19, 2020 7:13 pm

Gill wrote:
Wed Feb 19, 2020 7:10 pm
The lifetime exclusion is now $11.58 million.
Gill
I keep doing that (forgetting they doubled it). :P
My number was still wrong though, but now it's even less of a concern.

lkar
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by lkar » Wed Feb 19, 2020 7:26 pm

The single most important consideration is the one made by Gill and others that might be getting lost: A disclaiming beneficiary does not get to choose where the money goes. It will go to the place the law says it must go, based on the relevant documents.

With respect to taking the money and gifting it, a couple of small points: The lifetime cap could change in the future and the change could theoretically have retroactive effect. Taking possession of the money could have consequences other than tax. For example, it might affect alimony even though it is separate property and could even affect other things under particular divorce decrees, or it might be includable in the parent's asset portion of the student financial aid calculation. The gift payment could be deemed a preference and reachable by creditors if made in a certain period before bankruptcy. It might also be reachable by judgment creditors. Etc. These are all fairly esoteric and uncommon, but we really have no idea why the person being discussed by the OP wants to disclaim.

(No legal or tax advice here. Just ruminations. If you're a judgment debtor, for example, you shouldn't be relying on anonymous guy on the internet to tell you what your potential obligations are!!!)

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LeeInTN
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by LeeInTN » Wed Feb 19, 2020 9:03 pm

Again, very helpful info. In this case, none of the aforementioned complexities exist. The disclaimant simply doesn't need the cash and wishes to share with sibs who are not as financially secure. My mention of the $15K per person is just to avoid filling out another form. No limits or exclusions will be involved.

Katietsu
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by Katietsu » Wed Feb 19, 2020 9:44 pm

I still would start with the determining the distribution of funds if one sibling disclaims. Since this is a simple bank account and CDs, my personal experience is that it makes it more likely than not that a simple disclaimer would lead to the desired outcome. Not only was this true with my father’s accounts, but it is also true with my accounts. I have accounts with half a dozen institutions that are set up with a group of 7 beneficiaries. If any one of them disclaims, the funds are split between the remaining 6.

I do understand that there are other possibilities and have personal experience with some of the alternative situations that Gill and bsteiner have outlined. But since the simplest setup and solution is probably the most common for a bank account. I would start there in the hope that the best solution is also the simplest solution.

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Raymond
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by Raymond » Wed Feb 19, 2020 10:01 pm

I have no idea if these links from findlaw.com will be helpful:

Tennessee Code Title 31. Descent and Distribution § 31-1-103

which in (c), three-quarters of the way down the page, references this:

Tennessee Code Title 32. Wills § 32-3-105
"Ritter, Tod und Teufel"

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LeeInTN
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Re: How One POD Beneficiary Can Disclaim Inheritance

Post by LeeInTN » Thu Feb 20, 2020 5:03 pm

Thank you. The second portion is especially interesting.

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