While no one is happy when someone that they care about passes away, the property of the deceased must be distributed in some manner. If a person thought enough of you to leave you an inheritance, it is probably going to be welcome, because it is a very positive final gesture.
Though it is a rare occurrence, people do sometimes have reasons to refuse inheritances. Is this possible from a legal perspective? Before we answer the question, we will look at some of the reasons why an individual may not want to accept a bequest.
They Don’t Like the Decedent
We cannot beat around the bush and explain the first reason diplomatically. In some cases, people don’t want to accept inheritances because they simply do not like the person that is leaving the bequest. They see it as “dirty money.”
There are a number of different scenarios that can come to mind, but to use a simple example, let’s say that your grandfather got remarried to a younger woman late in his life. He changed his will to leave his new spouse everything, and the family feels betrayed by this arrangement.
All family members are perfectly comfortable financially, so the money was not needed, but the whole situation seems impure. The woman does inherit everything from your grandfather, and she dies several years later.
You are informed that she named you and your grandfather’s other children in her will, and you are all supposed to receive a relatively small but somewhat significant inheritance. Under the circumstances, you really don’t want the money.
It would be possible to disclaim the inheritance by filing the appropriate paperwork with the probate court and/or the executor of her estate. You would not be legally compelled to accept the bequest.
Estate Tax Implications
High net worth individuals have be concerned about the potential ravages of the federal estate tax and its 40 percent maximum rate. There is however an $11.7 million credit or exclusion. This is the amount that could be transferred before the estate tax would become applicable.
There are some states in the union that have state-level estate taxes, and New York is one of them. The exclusion on the state level is just $5.93million, and there is an estate tax exclusion “cliff.” In our state, if the value of an estate is more than 5 percent over the exclusion amount, the entirety of the estate would be subject to taxation.
An inheritance could potentially trigger additional tax liability for some people. A scenario such as this could conceivably motivate someone to disclaim an inheritance.
Need-Based Government Benefits
Some people rely on government benefit programs that are only available to individuals with limited financial resources. Medicaid is a source of health care insurance for individuals with very little money, and for many, a loss of the benefit would be catastrophic.
An inheritance could impact eligibility, and this is another reason why someone may want to disclaim an inheritance.
We Are Here to Help!
It’s great to build on your knowledge, but at the end of the day, there is no substitute for a direct consultation with a licensed estate planning attorney.
If you would like to discuss your objectives with a knowledgeable attorney from our firm, we can set up a safe consultation. You can request an appointment right now if you call us at 585-374-5210, and there is a contact form on this website that you can use to send us a message.