thanks, but no thanks. how to refuse an inheritance
Generally, a beneficiary’s acceptance of an inheritance is necessary for him to receive title. This is because the beneficiary must not only accept the benefits of the property being inherited, but also the burdens, restrictions, and conditions that the testator has imposed.
For simple bequests to individuals, the court will usually assume that the inheritance has been accepted, unless the beneficiary positively declines. Further, if the beneficiary accepts the inheritance without reservation, the court will likely deem the inheritance accepted.
Can you refuse an inheritance?
A question that comes up during probate is whether you can refuse an inheritance. Of course, if you do not want to receive the inheritance you are entitled to under the will being probated, you can refuse to accept it. But, the refusal must be made in a specific way as directed in the Tennessee Statute. The act of refusing an inheritance in Tennessee is known as “disclaiming an inheritance.”
What happens to a disclaimed inheritance?
When beneficiaries disclaim an inheritance, the result is fairly straightforward. When a person makes a timely renunciation or disclaimer, the disclaimer “relates back” to the date of the death of the decedent. In other words, the disclaimer is treated as if it was made when the decedent died.
Sometimes, a will may include provisions that specify what happens to any property that is disclaimed. For instance, the property can be passed to a specific beneficiary or it can pass under the residuary clause of the will.
If there isn’t a provision about disclaimed inheritance (or if the decedent died intestate), then the inheritance will pass as if the disclaiming beneficiary died before the testator, and the property will pass to the next beneficiary in line.
How do you disclaim an inheritance?
Disclaiming an inheritance is not difficult, but must be done correctly. Under prior law, the disclaimer had to be filed within nine months of the death of the testator with the applicable probate court. These requirements no longer apply, however, as the prior disclaimer statute was replaced in 2019 by the “Tennessee Disclaimer of Property Interests Act.”
Currently a disclaimer under the Act is timely as long as the beneficiary (the “disclaimant”) has not waived the right to disclaim an inheritance in writing, accepted the inheritance, transferred the inheritance, or if a judicial sale of the inheritance has occurred. Instead of being filed with the probate court, the disclaimer only need be delivered to the personal representative (or executor) of the decedent.
State statutory requirements for disclaimers.
According to Tennessee law, to be effective, a disclaimer must:
Be in writing;
Declare the disclaimer, and the extent thereof;
Describe the interest or power disclaimed; and
Be signed either by: (A) The person making the disclaimer; or (B) Some person subscribing the name of the person making the disclaimer, in the person’s presence and by such person’s express direction in the presence of two (2) or more witnesses competent to witness a will.
In addition, a partial disclaimer may be expressed as a fraction, percentage, monetary amount, term of years, limitation of a power, or any other interest or estate in the property.
Federal requirements for disclaimers.
According to the IRS, the person who decides to disclaim the asset must meet the following requirements to use a disclaimer:
Provide an irrevocable and unqualified refusal to accept the assets.
Make the disclaimer in writing.
Disclaim the asset within nine months of the death of the assets’ original owner (one exception: if a minor beneficiary wishes to disclaim, the disclaimer cannot take place until after the minor reaches the age of majority, at which time they will have nine months to disclaim the assets).
The person disclaiming cannot have benefited from the proceeds of the disclaimed property.
The person disclaiming cannot have the assets indirectly passed to them.
The person disclaiming must have no influence over who is the contingent beneficiary.
Sometimes it makes sense to say "no" to an inheritance.
The reasons for refusing an inheritance are varying. Sometimes a beneficiary wants the inherited funds to go to someone else. Other times, a beneficiary doesn’t want to inherit a debt on an asset.
A common reason may be if the beneficiary has filed for bankruptcy, and would lose the property anyway.
Sometimes, there may be financial benefits to disclaiming an inheritance such as taking advantage of another family member’s lower tax bracket.
Another common reason to refuse an inheritance is to avoid inheriting a piece of property that will cost more money to maintain than it’s worth.
Finally, you may want to disclaim a piece of property that was inherited if you believe someone else will benefit from it more; for instance, if you have a college-aged family member that would need an inherited car more than you.
The bottom line.
If you are a beneficiary and want to disclaim an inheritance, you should seek legal advice from an estate planning attorney. Make sure to discuss the benefits of disclaiming an inheritance as well as the potential risks. For instance, you may believe that the next beneficiary in line should receive the assets intended for you, without considering their tax bracket or potential expenses the next beneficiary in line may incur by having to manage the asset.
If you have questions related to an inheritance or you decide to disclaim an inheritance, schedule a consultation to speak with an estate planning attorney today.
