One of the problems that can arise when a person develops their estate plan without consulting with family and other beneficiaries is that people inherit things they don’t want or need. It’s easy enough to give an ugly sculpture or a closet of vintage clothing to a thrift shop.
However, what if you inherit a home or other large physical asset that you just don’t want to deal with? Maybe you’ve inherited a more liquid asset that could end up costing you money in taxes or that would have been better off going to someone else.
One option is to “disclaim” the inheritance
Fortunately the law allows people to refuse or “disclaim” an inheritance. When done correctly, it’s as though you never inherited it. That means you don’t have worry about taxes or taking any responsibility for it.
It’s also important to remember that if you’re considering disclaiming an inheritance, you can’t use it or derive any benefit from it. You need to attest to these things when you sign the disclaimer form.
What happens to a disclaimed inheritance?
If the deceased listed a secondary, or contingent, beneficiary for the asset, it would then pass on to them. If there isn’t one, then it would likely become part of the residuary estate to be disbursed with assets that were left to people who had already passed away and other “residue” of the estate. As the primary beneficiary, you can’t choose a contingent beneficiary for an asset you disclaim.
Gifting an unwanted asset
You can, of course, take possession of the asset rather than disclaiming it and give all or part of it to someone else. Just be aware, however, of any gift taxes that may be levied, depending on the value.
It’s important to inform the estate executor and/or the probate court as soon as you’ve decided to disclaim an inheritance. Before you do that, you may want to seek some financial as well as legal guidance to help ensure that you’re making the best decision and that you’re following the law.