While most people are hoping to be named in a will or trust to inherit from an estate, there are perfectly good reasons why some of us would not wish to receive an inheritance. Maybe it’s coming at the wrong time, or maybe it’s coming from the wrong person. Whatever the case may be, you do have the right to decline your inheritance if you so choose. And sometimes, quite simply, it is the smart decision for an individual to make.
Before you decide to say ‘no’ to your inheritance, it would be smart to speak with an attorney. There may be options and financial considerations you’ve not thought about yet. It is important that, when dealing with an estate plan and the rare opportunity to collect an inheritance, you make an informed decision. Additionally, there are certain requirements that need to be met to make sure that your refusal of the inheritance is legal and cannot be questioned.
Why Would Someone Consider Dismissing Their Inheritance?
There are many reasons why someone may wish to dismiss the assets that they were set to inherit, including but not limited to:
- Not wanting to pay estate taxes, which can sometimes be very costly.
- Hoping to ensure that the asset is inherited by the next in line, for example, a sibling or grandchild.
- Avoid unnecessary stress, such as the case of inheriting a fixer-upper home that you don’t have time for.
- Inheriting assets could increase the size of your personal estate, causing complications.
- Personal reasons regarding your relationship with the descendant which make you uncomfortable receiving anything from them.
If You Decline, Do You Get a Say in Who Receives the Inheritance Instead?
If you refuse an inheritance, you have no legal say in deciding who the assets go to instead of yourself.
New York law will see to it that the probate process carries on in a manner similar to that of the death of that beneficiary so that the asset(s) go to the named contingent beneficiary who is next in line.
If there was no valid will in existence at the time of death, the asset would be passed down according to New York’s rules of intestacy.
How Does a Beneficiary Decline an Inheritance?
You must satisfy certain conditions for the IRS in order to make your refusal of the inheritance legal. These steps include:
- A written disclaimer announcing your intention to refuse the inheritance. This disclaimer must be written as irrevocable.
- The written disclaimer should be signed and filed with the probate court and/or with the executor of the estate. This must be done within nine months from the time of death. (Beneficiaries who are minors have different stipulations.)
- If done correctly, the IRS will view it as though you never possessed these assets.
If you have already accepted any or all of your inherited assets, the IRS will likely regard your disclaimer as invalid.
To be better informed, please speak with an estate planning attorney in your state.