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Whether through Wyoming probate or Kentucky probate, you may have just found out you’re an heir to an estate. Being named a beneficiary in a loved one’s will brings many potential benefits: emotional comfort, property preservation, and financial gain.
However, not everyone wants the assets they inherit. For personal, legal, or financial reasons, you may wonder whether you can decline the assets bequeathed to you. The short answer to “Can an heir refuse an inheritance?” is yes. This post explores why you may want to decline an inheritance and the procedure for doing so.
Tax Reasons To Refuse an Inheritance
Potential tax implications are one of the main reasons beneficiaries refuse inheritances.
For example, accepting certain assets could bump you into a higher tax bracket. Some feel the inheritance is worth the jump in tax rates, while others do not. You may decline all or part of your inheritance to avoid increasing your tax bracket.
In addition, you may want to refuse an inheritance for estate planning purposes. A large sum may push your estate over the federal threshold, requiring you to pay estate taxes upon your death.
Note that around a dozen states also have estate taxes (paid by the estate), while six have inheritance taxes (paid by the heir). You will not be responsible for inheritance taxes if you refuse your inheritance.
Other Reasons To Refuse an Inheritance
Other reasons to refuse an inheritance include the following:
- You don’t want the hassle: Not all inheritances consist of cash, bonds, or trust funds. Instead, you may have received an old house that requires major renovations to live in or sell. If you don’t want to bother maintaining, repairing, or even selling inherited real estate, you may choose to decline it.
- You want to keep government aid: Many government aid programs have asset or income thresholds. If your inheritance pushes you over that amount, you may become ineligible for student loans, Medicaid, or other government benefits.
- You want someone else to benefit: Your reasons for declining an inheritance may also be charitable. Perhaps you simply don’t need the assets or believe another beneficiary needs them more. A sibling may be experiencing financial hardship, or your children may need the money for college.
- You believe it reflects the decedent’s wishes: Not everyone has the chance to update their will before they die. If a recent conversation with your loved one gave you special insight, you may believe declining your inheritance more accurately reflects their wishes.
- You have personal reasons: Other reasons are more personal. You may have had a complicated relationship with the deceased and not want what they left you. Perhaps you believe they were involved in questionable business practices and prefer to steer clear of the proceeds.
Those concerned about possible family disputes or other complications may wish to deny an inheritance for any of the above reasons.
Time Limits for Refusing an Inheritance
Now that you know the answer to the question, “Can an heir refuse an inheritance?” how quickly do you have to act? Under Internal Revenue Service (IRS) rules, you have nine months from the date of the original property owner’s death to disclaim your inheritance.
An exception applies to underage beneficiaries. If the heir is a minor when they receive the assets, the nine-month rule doesn’t begin until they reach the age of majority.
The Inheritance Refusal Process
Although the reasons for refusing an inheritance are personal, the decision has legal requirements and consequences. Heirs must follow an official disclaimer process to ensure the refusal is qualified under state and federal law.
The IRS requires a written disclaimer expressing your “irrevocable and unqualified” refusal to accept the inheritance. You must sign, notarize, and file it with the probate court or the will executor. You must not have already benefited from the disclaimed property, either directly or by having it passed to you indirectly. If you have, the IRS will likely consider your qualified disclaimer invalid.
You can typically refuse all your inheritance, a percentage of the assets, or a specific item. For example, you could accept bank account funds but refuse a car or a home. Make sure to consider both federal regulations and state laws when disclaiming your inheritance. As disclaimers are final, you cannot revoke them later.
What Happens to the Assets You Decline?
If you refuse your inheritance as the primary beneficiary, it will pass to the contingent beneficiary. Wills, insurance policies, and retirement accounts often name contingent beneficiaries who receive the proceeds if the first beneficiary dies, can’t be located, or refuses the property. Your refusal does not influence who the contingent beneficiary is.
If your loved one dies without a will, the property will follow state laws of intestate succession. Although the exact order varies by state, it typically follows a hierarchy starting with the closest relatives. For example, the estate usually goes first to the surviving spouse and/or children. If these don’t exist, it may go to surviving parents. The estate may be transferred to the state if no next of kin can be located.
Learn More About Rockpoint Probate Funding Today
In summary, the answer to the question, “Can an heir refuse an inheritance?” is yes. However, that doesn’t make it the right choice for everyone. While there are many reasons to refuse an inheritance, there are many reasons to accept one.
If you’re a beneficiary heir but need money now, contact Rockpoint Probate Funding today. We offer cash advances on pending inheritances to help beneficiaries cover expenses until the estate clears probate. Contact us today to learn more about the benefits of probate funding.
