As much as we all try not to admit it, when a loved one passes away we often anticipate receiving some type of inheritance. In fact, conflicts and discord often erupt because of the way in which a decedent chose to dispose of his/her estate. It may surprise you then to find yourself in a position one day where you don’t want an inheritance left to you – but it happens more often than you may realize. Rejecting an inheritance, however, is more complicated than it sounds as the Indianapolis estate planning lawyers at Frank & Kraft explain.
Why Would I Not Want to Accept an Inheritance?
The idea that you would turn down an inheritance may sound crazy at first but there are actually a few legitimate reasons why you might want to do just that, such as:
- The inheritance includes strings. People often like the idea of maintain control over the assets they pass down, even after they are gone. A trust allows them to do that by using the trust terms to require that the money can only be spent on specific things or to require the beneficiary to fulfill certain conditions in order to receive the inheritance. If you don’t like the strings, you might decide the inheritance isn’t worth it.
- There are negative tax consequences. You might live in a state that directly taxes an inheritance or there might be long-term negative tax consequences. 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.
- You might have significant debts. If you are heavily in debt, or in the process of bankruptcy, the inheritance you receive might be lost to creditors. Be aware though, if you are in the middle of a bankruptcy disclaiming an inheritance can be problematic. Consult with an experienced attorney before deciding how to proceed.
- You might lose critical state or federal 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. The temporary windfall could create more problems in the long run than it’s worth because re-qualifying is never assured.
- You feel like someone else should get it. Sometimes the reason is as simple as you feel it’s the right thing to do. Maybe the decedent didn’t get around to making changes to his/her estate plan after a marriage or birth of a child, but you know they meant to provide for that spouse or child. It might also be that the decedent is a parent who disinherited a sibling and you feel that was wrong.
Disclaiming Your Inheritance
Regardless of your reason for wanting to reject (legally referred to as “disclaiming”) an inheritance, if you want to do so you cannot simply say “no thanks.” The law requires a written disclaimer if you wish to reject an inheritance. Before you do that, however, be sure to consult with an experienced estate planning attorney for the following reasons:
- 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 inheritance.
- A disclaimer is irrevocable. Once you have disclaimed your inheritance you cannot interfere with what happens next.
Contact Indianapolis Estate Planning Lawyers
For more information, please join us for an upcoming FREE seminar. If you have additional questions about how to handle an inheritance that you do not want, contact the experienced Indianapolis estate planning lawyers at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
Paul A. Kraft, Estate Planning Attorney
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
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