Disclaiming Assets

Disclaiming an inheritance is an unusual decision that can make perfect sense. A disclaimer occurs when a beneficiary named in the will refuses to accept an inheritance. It seems absurd to refuse a gift but a disclaimer can solve common estate planning issues. Persons over 65 who are well-off may disclaim an inheritance to protect their own estates from crossing the federal estate tax threshold, currently set at over $5 million dollars. Disclaimers can also fix mistakes in an estate plan when the “next in line” to receive the assets is someone who the named beneficiary would like to receive the assets.

Valid disclaimers need to be in writing, irrevocable, and delivered to the executor within 9 months of death. Because the decision to disclaim is not reversible, it is important to think about all the options first. There can be no qualifications on the disclaimer: it is an all or nothing decision. And of course, a disclaimer will not be valid if the beneficiary has already accepted the assets. Subsequent beneficiaries are not controlled by the person disclaiming but are determined by the decedent’s estate plan.

Disclaiming a trust asset can be a convenient means to transfer that asset to another person while avoiding a gift tax. A person may desire to disclaim trust assets if money is not a problem and that person would like to accelerate the transfer of assets reminder beneficiaries. A good example of this is a mother who receives assets by trust from a deceased spouse but already lives comfortably. She elects to disclaim the trust assets in order to allow her children, who are forming a business, to receive the trust assets now. Those assets are likely to aid the business endeavor much more presently than they will years down the road. Without disclaimer, the children would receive the trust assets upon the mother’s death which could be years later.

If you have questions about disclaimers or any estate planning device, feel free to contact us at (626) 696-3145 for more information.

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