Even though it is not something that most people consider, you might face a situation one day in which refusing inheritances or gifts could be in your best interest. The process of refusing inheritances is not overly difficult, but it is something that requires careful care and consideration. Knowing what effect accepting an inheritance or gift will have on you and your family is essential if you want to know whether refusing them is a good idea or not. If you are worried that accepting an inheritance might not be in your best interests, or have questions about why refusing inheritances would be, you need to speak to an attorney as soon as possible. In the meantime, here are some common questions about refusing inheritances.
Question 1. When should I refuse an inheritance?
There are a lot of potential reasons why refusing inheritances can be a good idea. One of the most common comes when people are considering filing for bankruptcy. In general, there are two types of bankruptcies that most people consider filing: Chapter 7 and Chapter 11.
In a Chapter 11 bankruptcy, you and your creditors agree to enter into a repayment plan that will allow you to repay some, or perhaps all, of your debts over the next several years. In a Chapter 7, however, you decide to liquidate your assets and use the money you obtain to pay back whatever debt you can. Those debts you are unable to pay back are effectively wiped out once you go through the bankruptcy process.
So, in a Chapter 7 bankruptcy, you effectively have to sell your property and use the money to pay back your debt. However, there is some property you get to keep, known as exempt property. For example, you can keep your home and a personal car in most bankruptcy situations.
On the other hand, non-exempt property must be used to pay back your creditors. Inheritances you receive shortly before, or during the process of, filing for bankruptcy are considered nonexempt assets. In other words, if you receive an inheritance, you have to use it to pay back your debt.
Question 2. What happens to an inheritance or gift I refuse?
That depends on the circumstances of the inheritance, but there are some common outcomes. For example, let’s say you stand to receive an inheritance from a deceased grandparent. The grandparent died without a last will and testament, and you are receiving your inheritance because Florida probate law states that you are one of the legal heirs. If you refuse that inheritance, probate law will determine who is next in line to receive that inheritance. In most situations, the inheritances people refuse will likely go to their close relatives.
In other situations, such as where a deceased person left behind inheritances under the terms of the last will and testament, the inheritance would pass under the terms of the will.