Renouncing or Disclaiming an Inheritance

Have you heard of someone disclaiming their inheritance and wondered what that means and why they would do so? There are times and reasons when an heir or beneficiary wishes to renounce or disclaim all or part of an inheritance from an estate, i.e., refuses to accept the gift. Among the many reasons are: (i) unintended tax consequences, (ii) inheritances that disqualify special needs beneficiaries from government benefits, (iii) the beneficiary owing money to many creditors, or (iv) the realization that the other beneficiaries need the inheritance more or deserve it more. These are some of more common reasons we see disclaimers.

To properly disclaim or renounce your share or a specific part of a share, at minimum the renunciation must:

• Be in writing;
• Describe the specific property being disclaimed;
• Be dated within nine months of the death of the decedent, or once the beneficiary attains the age of 21;
• And filed with the Executor and/or Court.

While disclaiming an inheritance can be a useful tool in specific circumstances, there are some considerations before any agreement is signed:

• Once effective, the disclaimer is irrevocable. You cannot change your mind if your circumstances change.
• If the Will or Trust determines that if the beneficiary dies then the share passes to someone else, the asset will pass to that person. You do not get to choose where the inheritance goes. For example, Grandma leaves Jane and John each $10,000 but if John or Jane does not survive grandma, the $10,000 goes equally to any children they have. John took grandma to all her doctor’s appointments and has debts from student loans while Jane lived too far away to help take care of grandma and doesn’t have student loans so she feels John should get her $10,000. Jane decides to disclaim her interest. But the money will not go to John, rather it will pass to her son under the terms of the Will.

So what does Jane do? She has two choices: one, she can accept the inheritance and then just give John the money as a gift. Since it is under the $15,000 gift tax amount this is easily done. For larger inheritance amounts this might not be possible though. Two, John and Jane could sign an Agreement by Heirs, which is a contract between the parties that the assets will be divided differently than the terms of the Will. Again, this solution only works in specific scenarios.

If you are considering disclaiming or renouncing an inheritance or specific part of an inheritance, working with an estate attorney to assure the disclaimer is done properly and there are no unintended consequences is important. At Grissom Law, we work with clients to draft and execute legally valid disclaimers that assure the outcome all parties are working toward.

Disclaimer

This Blog/Web Site is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide legal advice. By using this blog site you understand that there is no attorney-client relationship between you and Grissom Law, LLC.