What to Do About an Unwanted Inheritance

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Although people typically want the inheritance a loved one leaves behind for them, there are some situations where an inheritance may be unwanted. In these cases, you need to disclaim the inheritance.

Instead of feeling honored by an inheritance, some people may feel burdened by it for reasons such as:

·        Taxes. If the inheritance brings your estate above the estate tax exemption amount, under current federal rules, your estate would be taxed at 40 percent after you pass away.

·        Income. An inheritance that produces income may bring you into a higher income tax bracket.

·        Litigation or bankruptcy. You are likely to be sued or will probably be going through bankruptcy and think you will lose the inheritance anyway. Keep in mind, though, that you may not be able to disclaim an inheritance if you are currently going through bankruptcy.

·        Inability to maintain. Your inheritance involves something, such as property, that you would be unable to maintain.

·        Honoring the decedent’s wishes. Circumstances may have changed since the will was drafted, and you know that keeping the inheritance is not in line with your loved one’s wishes. Maybe your parent meant to leave an equal inheritance for you and your siblings, but the value of the assets may have changed and made the inheritance unequal.

Here are the requirements the IRS has set for officially disclaiming an inheritance:

·        You need to provide written notice to the executor or administrator of the estate with a statement that you are disclaiming the assets and that this decision is irrevocable.

·        You must provide this statement within nine months of the decedent’s passing (unless you are a minor, in which case you have until you reach the age of majority).

·        You cannot benefit from the property you are disclaiming, either directly or indirectly.

Once you disclaim your inheritance, you don’t get a say in who gets those assets. The inheritance is treated as if you died before receiving it, and it goes to the contingent beneficiary named in the will (or to the next person in line under state law if there is no will).

Finally, disclaiming might not be a good option for Medicaid beneficiaries as the disclaimer may be considered a transfer of assets and could cause one to be ineligible for Medicaid for a period of time.

For help creating or updating your estate plan, contact us at Wilson and Wilson Estate Planning and Elder Law, LLC at 708 482 7090 for our main office in LaGrange, Illinois or at 847 656 8958 for our Northbrook, Illinois office.

https://www.elderlawanswers.com/what-to-do-about-an-unwanted-inheritance-18669