Heirs Who Just Say No, Thank You

by | Jan 18, 2023 | estate administration, estate and tax planning, Estate Planning


It’s difficult to imagine turning down an inheritance, yet that’s precisely what a qualified disclaimer is – a refusal to accept property or assets that have been bequeathed in a will or trust. The result – when the beneficiary of an estate or trust submits such a “No thank you” document- the IRS permits the property to skip to the next person in line.

But, but…why? Why “look the gift horse in the mouth?” Why turn away money or other assets you’ve inherited? The reason might be:

  • a positive one (the heir has enough assets and would prefer their children or grandchildren receive the benefit) or (the beneficiary is in a very high tax bracket and a large portion of the inheritance would go to taxes)
  • a negative one (the heir is in debt and the money would just go to creditors)

The term “qualified” implies that there are rules that need to be observed in saying “No, thank you”, and there are several:

  1. The disclaimer must be in writing.
  2. The disclaimer must be submitted within nine months of the gift or inheritance.
  3. The disclaiming person cannot decide where the gift goes (that must already have been specified in the estate planning documents of the person who’s died or the disclaimed assets will pass in accordance with state law, usually to the person’s children).

Pre-death disclaimer planning is intended to add flexibility to an individual’s estate plan, allowing for unknown future changes in circumstance. This type of planning includes:

  • Stipulating in the will that any disclaimed assets will go into a trust
  • Naming secondary or contingent beneficiaries on a retirement account, annuity contract, or life insurance policy.

Post-death planning addresses circumstances that have arisen since the time the estate plan was drafted, such as changes in the law or changes in the heir’s circumstances.

At Rebecca W. Geyer & Associates, we are very aware that disclaimers must be in accordance with tax law, both federal and state. But when used appropriately, the flexibility of disclaimers helps heirs say a polite, but very firm, “No, thank you!”

– by Cara Chittenden, Associate Attorney with Rebecca W. Geyer & Associates

It’s difficult to imagine turning down an inheritance, yet that’s precisely what a qualified disclaimer is – a refusal to accept property or assets that have been bequeathed in a will or trust. The result – when the beneficiary of an estate or trust submits such a “No thank you” document- the IRS permits the property to skip to the next person in line.
https://info.wealthcounsel.com/blog/how-qualified-disclaimers-make-estate-planning-more-flexible?utm_term=&utm_campaign=Dynamic+Search+Campaign&utm_source=adwords&utm_medium=ppc&hsa_acc=7497927863&hsa_cam=15948270369&hsa_src=g&hsa_net=adwords&hsa_ad=576130424557&hsa_kw=&hsa_mt=&hsa_grp=135345586231&hsa_ver=3&hsa_tgt=dsa-19959388920&gclid=CjwKCAiAqaWdBhAvEiwAGAQlttyODM817N1Yzc2emAF9mZGn8wkk5eUrp5CImieEh70B2lzpEKJd5RoCjsQQAvD_BwE

But, but…why? Why “look the gift horse in the mouth?” Why turn away money or other assets you’ve inherited? The reason might be:

a positive one (the heir has enough assets and would prefer their children or grandchildren receive the benefit) or (the beneficiary is in a very high tax bracket and a large portion of the inheritance would go to taxes)
a negative one (the heir is in debt and the money would just go to creditors)

The term “qualified” implies that there are rules that need to be observed in saying “No, thank you”, and there are several:

The disclaimer must be in writing.
The disclaimer must be submitted within nine months of the gift or inheritance.
The disclaiming person cannot decide where the gift goes (that must already have been specified in the estate planning documents of the person who’s died or the disclaimed assets will pass in accordance with state law, usually to the person’s children).

Pre-death disclaimer planning is intended to add flexibility to an individual’s estate plan, allowing for unknown future changes in circumstance. This type of planning includes:

Stipulating in the will that any disclaimed assets will go into a trust
Naming secondary or contingent beneficiaries on a retirement account, annuity contract, or life insurance policy.

Post-death planning addresses circumstances that have arisen since the time the estate plan was drafted, such as changes in the law or changes in the heir’s circumstances.

At Rebecca W. Geyer & Associates, we are very aware that disclaimers must be in accordance with tax law, both federal and state. But when used appropriately, the flexibility of disclaimers helps heirs say a polite, but very firm, “No, thank you!”
https://www.rgeyerlaw.com

– by Cara Chittenden, Associate Attorney with Rebecca W. Geyer & Associates