How to Disclaim an Inheritance and Reasons You Would
It’s important to understand what a disclaimed inheritance is before learning how to disclaim assets. A disclaimer is simply the act of refusing or renouncing an inheritance. This is a legal procedure that can be applied to property, real or personal, in your will. It allows you to give up certain items within your Will without actually having to transfer them along with the rest of the estate. This can be done verbally or in writing, and it doesn’t necessarily have to be for financial reasons – you could disclaim an inheritance for any number of reasons, like if you don’t want the responsibility or if you think the estate should pass on to someone else. You can also disclaim an inheritance if you can’t inherit for some reason, such as because you are under the age of majority. Your Will should contain a clause that prevents you from disclaiming any part of your inheritance, but the clause must be agreed upon by all heirs or it is void. In most cases of disclaiming an inheritance, the assets will pass on directly to the next closest of kin who would normally inherit the asset in the absence of the disclaiming party.
Reasons for Disclaiming an Inheritance
There are several reasons why one might want to do a disclaimer of an inheritance. Some of the most common ones include:
- Not wanting to inherit an asset, such as if it would cause a tax problem or conflict with another estate plan
- Having another person in line for the returns who you think is more deserving than yourself
- Not wanting to inherit an asset out of fear that it will be used for illegal purposes
- Not being willing or able to take care of the inheritance at the time of death
- Having other business arrangements that would allow you to avoid paying taxes on the assets
- The inheritance is tied up in litigation and there is no guarantee that you will actually receive it
- You are underage and cannot inherit the assets directly
There are many reasons why someone might disclaim an inheritance, but most of them boil down to either not wanting or not being able to take care of the asset. It’s important to remember that if you do disclaim an inheritance, it does not prevent you from inheriting again in the future.
Process of Disclaiming an Inheritance
If you want to disclaim an inheritance, there are a few steps you need to take. First, you need to make sure that the Will has a clause stating that you have the right to disclaim any part of the estate. Second, you need to notify all interested parties in writing that you are disclaiming the inheritance. And lastly, you need to notify the executor in writing and return any property that has already been transferred to your name. If an heir wants to disclaim an inheritance, they should contact their nearest relative (usually a parent) who is named as the executor of the Will or personal representative of the estate. The heir should also consult a lawyer to make sure that the disclaiming of the inheritance is done correctly and doesn’t affect any future rights to inherit.
Requirements for a Valid Disclaimer
There are a few requirements that must be met in order for a disclaimer to be valid.
- The person disclaiming the inheritance must be an adult and have the mental capacity to make the decision.
- The disclaimer must be made in writing, although it can be oral if it’s followed by a written statement.
- The disclaimer must be made within nine months of when the person died (if there is no Will) or when it would have otherwise passed to you (in cases where there is a Will).
- There cannot be any penalty attached to disclaiming an inheritance in order for it to be valid, and the person making the disclaimer cannot receive anything in return.
- The inheritance must be given up willingly and without any duress or coercion.
If all of these requirements are met, then the disclaimer will be considered valid. If not, the courts may decide that the disclaimer is invalid and the inheritance will still pass to the person disclaiming it.
Example of Disclaiming an Inheritance
The following is the disclaimer of an inheritance clause from a Will: “I, John Doe, being of sound mind and having the capacity to make this Will, hereby give, devise, and bequeath all of my property and estate to my son, Timothy Doe.” “If for any reason my said son does not survive me or is not qualified to receive my property, then I give devise and bequeath the same to my daughter, Sarah Doe.” “I hereby disclaim any and all interest in the property and estate hereinbefore devised to my son, Timothy Doe.” In this example, John Doe is disclaiming his inheritance from his son, Timothy Doe. He does not want to receive the property or estate if his son does not survive him or is not qualified to inherit it. This disclaimer is valid because John Doe meets all of the requirements (being of sound mind, capacity to make a Will, in writing, within nine months of death/when the property would have passed to him, no penalties attached, willingly, etc.).
Consequences of Disclaiming an Inheritance
If someone disclaims an inheritance, there are a few consequences:
- Any gifts that were given to the person who disclaimed them should be returned, and if they can’t be returned, then their value should be repaid back to whoever gave them.
- If the person disclaiming is married at the time of death but is not widowed, the disclaimer will be considered divorce for tax purposes.
- The person disclaiming will no longer be considered an heir and will not inherit anything from the estate.
- If the disclaimed inheritance is a life insurance policy, the beneficiary designation will be canceled and the money will go to the estate.
If the person disclaiming is a surviving spouse, then they will still receive a portion of the estate that is their separate property.
A disclaimer is a written statement saying that one does not want or cannot accept an inheritance. When disclaiming an inheritance, you are legally giving up the right to inherit the property or money. Disclaimer of an inheritance must be in writing and follow certain guidelines set by law. Furthermore, the process can be complicated, so it’s important to seek legal help if you’re unsure of what to do. The lawyer can help make sure that the disclaimer is done correctly and that there are no negative consequences for doing so. Remember that if you disclaim an inheritance, you are not giving up your right to inherit anything in the future.
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.