Just because someone leaves you money or property in their Will or Trust does not mean you have to accept it. There may be good reasons not to.
For example, if you are well enough off, you may want the money to pass to your kids instead, and maybe save on estate taxes on your own estate. The refusal to accept an inheritance is called "disclaimer." If you disclaim your inheritance, it is treated as if you died before.
Warning: You do not get to direct who the inheritance goes to if you disclaim. The money will go according to the provisions of the Will or Trust as if you died before and you aren't alive to take it.
Under most estate plans, the Will or Trust will say that if you die before, the money goes to your children, but not always. You should not disclaim your inheritance without being sure where the money will go if it doesn't go to you.
The disclaimer must be in writing and it has to be signed and delivered within nine months from date of death. There are strict requirements, and you should not disclaim without good legal advice. If you follow all the rules of the disclaimer, the inheritance will be redirected without any tax consequences to you. The money will not be included in your taxable estate. The money passing to your kids is not treated as a gift from you, so there is no gift tax return for you to file.
Disclaimer has strategic uses too, such as to avoid creditors. If money that would otherwise go to creditors could be redirected to the next beneficiary in line, the creditors wouldn't get it. And, sometimes, when someone dies with a Will or Trust that was not updated and circumstances have changed,
disclaimer can be used post-death to change how the estate will
By Lisa Alexander, Esq.
JAKLE, ALEXANDER & PATTON, LLP
Direct Line: 310-656-4310