Disclaiming an Inheritance. Why and How Would I Do It?

dan • March 11, 2023

Believe it or not, there are circumstances in which you may not want to receive an inheritance. At The McKenzie Law Firm, we understand the complexities that come with inheriting assets. One option that some individuals may consider is disclaiming an inheritance. In this post, we will provide a comprehensive guide on how to disclaim an inheritance, the benefits and drawbacks of doing so, and the legal implications involved.

What does it mean to disclaim an inheritance?

Disclaiming an inheritance is when a potential heir renounces their right to inherit any assets or property left to them. This decision must be made before the heir takes any possession or control of the inheritance. There are no reversals. If you have already received the asset, you cannot give it back to the estate and disclaim it. Even receipt of indirect benefits, such as directing the estate's executor as to who should receive the asset instead of you, can take away your option to disclaim. On the other hand, all refusals are final, so it is essential to weigh the consequences before taking any action.

Benefits of disclaiming an inheritance

There are several benefits to disclaiming an inheritance. One of the most significant benefits is avoiding any potential tax liabilities associated with the inherited assets. Depending on the value of the inheritance and the individual's financial situation, the tax burden could be significant. If you have a taxable estate, for example, the receipt of additional assets will result in taxes that may not have to be paid if they go to a beneficiary who does not have a taxable estate. Another benefit is that disclaiming an inheritance could help protect the individual's eligibility for government benefits. Certain government programs have income and asset limits, and inheriting assets could push an individual above those limits, making them ineligible for the benefits they need.

drawbacks of disclaiming an inheritance

Although there are benefits to disclaiming an inheritance, there are also drawbacks to consider. One significant drawback is that the individual would be giving up any control over the inherited assets. Once the inheritance is disclaimed, the assets would pass to the next eligible heir, as determined by the laws of intestacy. This means that the individual would not have any say in how the assets are distributed or used.
Additionally, if the individual who disclaims the inheritance is married, the inheritance may be considered marital property in some states. This means that the inheritance would be subject to division in the event of a divorce.

how to disclaim an inheritance

If you decide to disclaim an inheritance, there are specific steps you must follow to ensure that the process is legally valid. First, the disclaimer must be in writing and signed by the potential heir. The disclaimer must also be delivered to the executor of the estate or the trustee in charge of the assets.
As noted above, it is essential to note that the disclaimer must be made before the individual takes any control or possession of the inherited assets. If the individual has already taken possession of the assets, it is too late to disclaim the inheritance.

conclusion

Disclaiming an inheritance is a significant decision that should not be taken lightly. It is important to weigh the benefits and drawbacks carefully and consider the legal implications involved. If you are considering disclaiming an inheritance, it is always a good idea to consult with an experienced estate planning attorney to ensure that you understand your options fully.

what next?

If you are administering or inheriting from an estate and think you might benefit from , you can:

Give us a call at 720-821-7604 to schedule a "Discovery Session" at which we can determine whether our firm would be a good fit for your needs. Or fill out our contact form to have us call you.
Visit our estate administration page to learn more about how proactively thinking through your estate plan can protect you and your family, minimize hassle, lower the chance of family discord, and minimize or eliminate taxes.
Learn more by reading our blog or watching our videos.