While most people won’t actually say anything out loud, when a family member passes away they start to wonder what they will inherit from the decedent’s estate. In fact, family members often end up in costly and divisive court battles over the inheritance to which they feel they are entitled. Believe it or not, however, beneficiaries don’t always want the inheritance left to them by a family member or loved one. When that happens, can a beneficiary or heir reject an inheritance? The Port St. Lucie estate planning attorneys at Kulas & Crawford explain why someone might not want an inheritance and how to properly reject an inheritance if you ever find yourself in a position where you want to do so.
Why Would I Want to Reject an Inheritance?
The obvious question is why would you ever want to turn down a free gift? At first glance, it may seem like an unlikely thing to want to do; however, there are actually several very good reasons why you might someday decide to reject (in legal terms “disclaim”) an inheritance, such as:
- Tax consequences – some states directly tax an inheritance you receive. Even if the inheritance isn’t directly taxes, there may be tax consequences down the road to accepting the gift. If the next person in line to receive the inheritance is your child who is in a much lower tax bracket, and you plan to spend the money on him/her or leave it to him/her anyway, it can make more sense to disclaim and allow it to pass immediately.
- You are in serious debt or in bankruptcy. If you are already in serious financial trouble, and the inheritance would simply be lost to creditors without paying off all your debt, disclaiming can make sense. Be careful, however, if you are in the middle of bankruptcy at the time because disclaiming an inheritance while in the process of seeking bankruptcy protection can be problematic. If the Trustee finds out, he/she could go after the assets anyway and you could be in trouble for not divulging the inheritance.
- Real property is problematic. Sometimes, real property simply isn’t worth it. If the property is run-down or isn’t very valuable, the taxes and upkeep could be more than the property is worth. Environmental concerns should also be considered. If the property is contaminated or full or mold, asbestos, or lead paint, the clean up or remediation may be extremely costly – particularly if the state or federal authorities are in charge of it.
- Loss of assistance. If you are dependent on assistance programs such as Medicaid, Veterans Aid and Attendance, or Supplemental Security Income (SSI) an inheritance could disqualify you for those benefits until such time as your assets fall below the program limits once again.
- It’s the right thing to do. Sometimes a parent, or other loved one, did not get around to making changes to their estate plan that you know they meant to make. For example, if your father recently remarried and you know he intended to include his new wife in his Will be never got around to doing it, disclaiming your inheritance might be the right thing to do.
How Do You Disclaim (Reject) an Inheritance?
If you decide you don’t want an inheritance, you cannot simply tell someone that you don’t want it. The law requires a written disclaimer if you wish to reject an inheritance. Before you do that, however, be sure to consult with an experienced estate planning attorney for the following reasons:
- For a disclaimer to be valid, it must be in writing, contain the correct language, and be delivered to the right person within a specific amount of time.
- It is crucial that you know with certainty who will inherit if you disclaim your inheritance.
- Certain actions you take could prevent you from being able to disclaim your inheritance.
- You must disclaim your entire inheritance.
- A disclaimer is irrevocable. Once you have disclaimed your inheritance you cannot interfere with what happens next.
Contact Port St. Lucie Estate Planning Attorneys
To learn more, please download our FREE solid estate plan checklist. If you have additional questions or concerns about rejecting an inheritance, please contact the experienced Port St. Lucie estate planning attorneys at Kulas & Crawford by calling (772) 398-0720 to schedule an appointment.