Even though the idea sounds strange to most people, there might come a day when you choose to refuse an inheritance. Whether you are receiving your inheritance from a grandparent, a parent, another relative, or someone who is not related to you at all, choosing to refuse the gift is sometimes a prudent decision. While determining whether accepting an inheritance is the right choice for you requires the advice and assistance of an experienced estate planning lawyer, here are several facts about refusing inheritances you should understand.
Disclaimers and Inheritances
No one is ever legally obligated to accept an inheritance. Someone who receives an inheritance is known as a beneficiary. As a beneficiary, you have the right to disclaim the inheritance gift passed to you. Disclaiming an inheritance essentially involves creating a document that states your decision not to accept the gift. You also have to make sure that you deliver this document to either the executor or the trustee, and make sure you do so in a timely fashion.
Refusing the Inheritance
There are a number of reasons why people might choose to refuse inheritances. One common reason is that the inheritance left is not worth the same value that it once was when the person leaving it made the gift.
For example, let’s say your grandfather leaves inheritances to each of his three children and grandchildren. At the time he created the inheritance plan, your grandfather intended to leave each grandchild an inheritance of $50,000. He also leaves an equal share of his house to each of his three surviving children. At the time he made his gift, the house was worth $150,000. However, since making the plan, your grandfather has had to sell the home, essentially leaving each of his three surviving children no inheritance.
In this situation, the grandchildren choosing to refuse the inheritance would effectively give the intended inheritances to the grandfather’s children.
Another common reason to refuse an inheritance is to both avoid tax or creditor problems. For example, if you already have a high degree of wealth, you’re probably concerned about your estate having to pay a portion of its value in estate taxes. If you’re already close to the estate tax exemption limit, receiving an inheritance would likely push your estate over that limit, meaning that part of the inheritance you receive would have to be paid as an estate tax.
However, should you choose to refuse the inheritance, the gift you would have received could go to someone who doesn’t have the same estate tax concerns you do. This would likely mean that there wouldn’t be an estate tax issue that threatens to deplete the value of inheritance.
Michael Robinson, Estate Planning Attorney
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