While it may not be openly discussed, one thing people start to speculate about after a loved one passes away is often the inheritance they may receive. In fact, long, drawn out court battles are often fought over the inheritance left to loved ones – or not left as the case may be. What happens though, if a decedent left you an inheritance that you don’t want? Because it isn’t as simple as saying “no thanks,” the Bath estate planning attorneys at the Law Office of Michael Robinson, P.C. explain what to do if you want to reject an inheritance.
Why Would I Turn Down an Inheritance?
The idea of turning down an inheritance may sound akin to throwing money away at first; however, it is more complicated than that because an inheritance is complicated. It isn’t like winning the lottery where an anonymous entity gives you money with no strings attached. Because of this, there are reasons why you might want to reject an inheritance, such as:
- You don’t feel right accepting some, or all, of the inheritance. This happens when you are notified that you are entitled to an inheritance but you believe that someone else should receive some – or even all – of it instead. The decedent may not have made changes to their estate plan that you know they meant to make, resulting in a new wife or child being left out unintentionally. Or maybe a parent intentionally disinherited a sibling of yours and you don’t agree with that decision. Whatever the circumstances that cause you to feel as though you are not entitled to the inheritance, rejecting it is your right.
- There are negative tax consequences associated with the inheritance. A handful of states directly impose an inheritance tax. There may also be other indirect taxes associated with accepting the inheritance; however, 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.
- 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 cleanup or remediation may be extremely costly – particularly if the state or federal authorities are in charge of it. In the end, your “windfall” inheritance may cost you more than it’s worth.
- 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 a 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.
- You could lose much-needed 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. By accepting the inheritance, you will have to go through the application and approval process all over again.
What Do I Do If I Want to Disclaim an Inheritance?
You cannot simply tell the Executor that you don’t want the inheritance. Rejecting, also referred to as “disclaiming,” an inheritance requires a written disclaimer. There are several important reasons why you should always consult with an experienced estate planning attorney if you are considering rejecting an inheritance.
- 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 interest in the inheritance.
- A disclaimer is irrevocable. Once you have disclaimed your inheritance you cannot interfere with what happens next.
Contact Bath Estate Planning Attorneys
For more information, please download our FREE estate planning worksheet. If you have additional questions or concerns about an inheritance you are entitled to, contact the Bath estate planning attorneys at the Law Office of Michael Robinson, P.C. by calling (585) 546-1734 to schedule an appointment.