01 Nov When Should You Disclaim an Inheritance?

Refusing to accept an inheritance is not a decision you should ever take lightly. Once you disclaim an inheritance, you have no control over who will receive it. However, the estate planning attorneys at Phelps LaClair understand that accepting an inheritance is not always the right choice for everyone. There are many valid reasons to disclaim an inheritance, so today we’ll go over the main reasons to refuse an inheritance and the process of creating a disclaimer.

Four Reasons to Refuse an Inheritance 

1: To Keep Your Government Aid

Accepting an inheritance could set your income above the amount that qualifies you for government assistance. Making a disclaimer will prevent you from losing your eligibility for student loans, Medicaid, disability, and other assistance programs.

2: To Pass It to Someone Else

If you aren’t the only beneficiary in line, you can transfer the assets to the next beneficiary simply by disclaiming the inheritance. You can always choose to accept the inheritance and then give it to someone else. However, that will make the asset fall subject to the gift tax. If you choose to pass the inheritance on to another person, it’s a good idea to consult them first, just in case they have their own reasons to refuse it.

3: To Avoid Dealing with Debt

It may not be worth the hassle to collect your inheritance if you or the deceased person has a large amount of debt. Because creditors will receive payment from a deceased person’s estate before the beneficiaries, you may not receive as much as you were expecting. While your own creditors cannot directly take your inheritance, a court order could require you to pay off your debt immediately.

4: To Protect Your Finances

The inheritance’s amount could put you in a higher tax bracket or increase the size of your own assets. If you are worried about having to pay higher taxes, refusing an inheritance can ease that burden. 

How to Disclaim an Inheritance

Before you make a disclaimer, you should always consult an estate planning attorney first. They can help ensure that you satisfy all of the necessary requirements. According to the Internal Revenue Service (IRS), the rules for making a disclaimer dictate that:

• Your written disclaimer must specifically state an irrevocable and unqualified refusal of the inheritance.
• You have nine months to disclaim an inheritance after a person’s death. Minor beneficiaries have until nine months after reaching the age of majority. In Arizona, the age of majority is 18 years.
• You cannot receive any benefits from the proceeds of the assets that you disclaim.
• The disclaimed assets cannot pass to you directly or indirectly. 
• You must deliver the disclaimer to the person who controls the estate.

Estate Planning Attorneys in Arizona

Disclaiming an inheritance is a permanent decision that can’t be undone. If you have been named the beneficiary of an inheritance that you would like to disclaim, make sure to consult one of the professionals at Phelps LaClair. Our experienced team can help you to meet the necessary requirements for making your disclaimer. 

With over 40 years of experience in estate planning, we can help you safely leave your own inheritance through a will or living trust. For more information about our services for Chandler, Mesa, Phoenix, Scottsdale, and Glendale residents, call us at 480-892-2488 today. 

Images used under creative commons license – commercial use (11/1/2021). Photo by Scott Graham on Unsplash