It may come across as a surprise but some beneficiaries decline their inheritance due to different reasons. They often want this inheritance to be transferred to somebody else (for instance, a grandchild). The other reason may be that the beneficiary does not want to pay any kind of tax on the asset.
If you want to decline the inheritance, search “Real-Estate Lawyer Cornwall” on Google and you will find a suitable professional to help you. In order to be qualified for declining the inheritance, you have to follow the requirements laid out by the IRS. If you as a beneficiary has completely disclaimed the assets, your status as a beneficiary will be completely null and void.
Is Refusing the Inheritance an Option?
Yes, you can disclaim an inheritance. For that, you have to understand the effects of refusal. Also, the proper procedure for the same should be followed in order to be qualified under state and federal law.
A qualified disclaimer allows the beneficiary to refuse the entire or parts of an asset. It can be helpful in a case where someone has not created an “exemption trust” before his death.
In this case, the asset would be passed on to the contingent beneficiary. The estate will also be passed from the former beneficiary. If it’s a case of interstate death, the next beneficiary will be determined by the state law.
Why Do I Need a Disclaimer?
Disclaiming assets means that you never owned them in the first place. It is important for tax purposes. You can also disclaim a percentage of the assets inherited. So, it is always important to follow all the laid down requirements for a qualified disclaimer. If you as a primary beneficiary will not follow these requirements, the property will be deemed as a personal asset. It will be assumed that it has been given as a gift to the new beneficiary.
According to IRS, the following requirements should be fulfilled by the disclaiming individual for using the disclaimer –
- Give the disclaimer in writing
- Provide an unqualified and irrevocable refusal of the assets
- The assets should be disclaimed within a period of 9 months from the death of the owner. In case a minor wants to disclaim the trust, the disclaimer cannot come into existence before he has reached the age of maturity. Here, the person will be given a time of 9 months.
- The person cannot get access to the assets indirectly
- The person should not have any influence on the contingent beneficiary
- The person cannot be benefitted from the proceeds derived out of a disclaimed property
In some states, you have to include a statement mentioning that you are not subject to bankruptcy. If you are disclaiming a property, always hire the best Real-Estate Lawyer Cornwall resides for legal assistance.
What About the Assets?
If you are disclaiming a property, you cannot decide who will receive the disclaimed property. The assets will be handed over to the contingent beneficiary (chosen by the original owner).
Declining Inheritance for Tax Purposes
In inheritance, sometimes the receiver has to pay more than he is receiving. This is mainly due to tax implications. So, in this case, a lot of receivers decline the gift for tax efficiency. Trusts if disclaimed are used to avoid the gift and federal estate taxes.
Declining Inheritance for Other Reasons
Apart from a reduction in the taxes, there are some other reasons as to why the beneficiary will disclaim the inheritance. These reasons are –
- In order to avoid any undesired real estate property like eroding property at the beach or property with levied real estate taxes. These kinds of properties take a long time to sell.
- In order to avoid giving those assets to the creditors if the primary beneficiary is involved in a bankruptcy or lawsuit proceeding
- For benefit of some other family member like a college-going grandchild
- To gain an advantage over the other beneficiary who falls into the lower income tax bracket.
Let’s understand this with the help of an example –
Steve has made John (his son) the beneficiary of his assets. Steve is dead after a few years. Not if John inherits these assets, he will not be eligible to apply for a student loan. So, for that purpose, John wants to disclaim the assets. Now he will not be treated as the designated beneficiary.
Trusts are for security but sometimes, disclaiming the assets are much more beneficial. Although there are no special documents for disclaiming the assets, you require a letter. You should also meet the requirements laid down by the IRS. Talk to a reliable estate lawyer and get everything sorted out without too much headache.
Langevin Law LLP is trusted, experienced, and knowledgeable. Do not hesitate in contacting us today for all your real estate planning needs.