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What to Do About an Unwanted Inheritance

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What to Do About an Unwanted Inheritance

January 27, 2022
Geoff Hoatson

While an inheritance is usually desired, there are some circumstances in which it might be unwelcome. If you don’t want an inheritance, you must disclaim it.

Most people who receive an inheritance are honored, but for some, it can be more of a burden than a blessing. The following are some reasons why an inheritance may be unwanted:

  • Taxes. If the inheritance would bump your estate above the estate tax exemption amount, when you die, your estate would taxed at 40 percent, under current federal rules.
  • Income. If the inheritance is income producing, it could push you into a higher income tax bracket.
  • Litigation or bankruptcy. You are in a position to be sued or you think you will soon be going through bankruptcy and are likely to lose the inheritance anyway. Note that if you are currently going through bankruptcy, you may not be able to disclaim an inheritance.
  • Inability to maintain. The inheritance involves a piece of property or something else that you would be required to maintain and you are not in a position to do so.
  • Honoring the decedent’s wishes. Circumstances may have changed since the drafting of the will that mean that keeping the inheritance does not honor the decedent’s wishes. For example, a parent may have meant to leave assets of equal value to each of their children, but the assets may have increased or decreased in value, making the inheritance unequal.

In order to officially disclaim an inheritance, the IRS sets the following requirements:

  • You must provide written notice to the executor or administrator of the estate that includes a statement that you are disclaiming the assets and that the decision is irrevocable.
  • he statement must be provided within nine months of the decedent’s death (minors have until they reach the age of majority).
  • You cannot benefit from the disclaimed property, directly or indirectly.

You have no say in who gets the inheritance once you disclaim. The inheritance would be treated as if you died before receiving it. It would go to the contingent beneficiary named in the will or if there is no will, it would go to the next person in line under state law.

Disclaiming may not be the best option for Medicaid beneficiaries. If you are receiving Medicaid benefits and disclaim an inheritance, that disclaimer may be considered a transfer of assets and make you ineligible for Medicaid for a period of time. For information about receiving an inheritance on Medicaid, click here.

If you'd like to learn more about your options, give our office a call at (407) 574-8125 or email us at Team@familyfirstfirm.com.

Copyright © 2024. Family First Firm - Medicaid & Elder Law Attorneys. All rights reserved.
The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information in this post should be construed as legal advice from the individual author or the law firm, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting based on any information included in or accessible through this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country, or other appropriate licensing jurisdiction.
Family First Firm – Medicaid & Elder Law Attorneys
(407) 574-8125
https://familyfirstfirm.com
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