Now, why would you want
to do that? After all, receiving that bequest of the family lake cabin or Mom's
investment portfolio is like pennies from heaven, right?
But there are situations
in which it might be unwise--even detrimental--to accept a major
inheritance. In such instances, the beneficiary has the right to refuse the
inheritance, or certain parts of it. The act of refusing a bequest
is called a "disclaimer," and the beneficiary who refuses it is
called the "disclaimant." Disclaiming is the
beneficiary formally saying "I don't want it."
The law states that the disclaimed asset will pass as if the named beneficiary died before the decedent. Thus, the asset will pass according to the succession provisions in the decedent's Will. This may pass it to the beneficiary's children or perhaps into a trust. If there is no Will, the inheritance will be distributed according to the laws of intestate succession.
Some reasons
an heir might wish to disclaim a bequest:
- The beneficiary is financially well-off and does not need the money or asset. Receiving it will substantially increase the beneficiary's estate--and taxes. Disclaiming the inheritance may reduce tax liabilities.
- Accepting the asset would create a burden for the beneficiary. Perhaps it's real property that needs a lot of work or maintenance, it's located far away, or it's something the beneficiary wouldn't use. It may be jointly owned by someone the beneficiary would rather not have to deal with. Paying taxes and insurance on inherited property could be difficult for someone on a tight budget.
- Your creditors will take it. If you are on the verge of bankruptcy and the inheritance isn't sufficient to cover your debts, it may be transferred to your creditors.
- Receiving the asset may lead to drama among family members. Perhaps your siblings were hoping to inherit the property and may be resentful that you received it. What price do you put on family harmony?
- You simply don't want the asset and you'd rather see some other family member enjoy it.
How do you disclaim an inheritance?
The disclaimer must be made in accordance with both federal and Minnesota law. Minnesota has adopted the Uniform Disclaimer of Property Interests Act (UDPIA).
Under federal law, the beneficiary
must make an irrevocable and unqualified refusal to accept interest in the
asset within nine months of the decedent's death. The disclaimer must be in
writing, identifying the property, and signed and dated by the beneficiary. The
beneficiary must not accept the property or any income from the property prior
to making the disclaimer, nor should the beneficiary transfer any interest in
the property. In addition, the beneficiary cannot direct how the disclaimed
property is to be distributed, nor can the beneficiary direct where the asset
goes. Hence, "unqualified."
Under Minnesota law, disclaimers must be delivered to the appropriate person. In the case of property distributed by a Will, that person is the personal representative. However, if no personal representative is currently serving, the disclaimer must be delivered to the clerk of court. If the property to be disclaimed is real property, the disclaimer must also be recorded in the county in which the real property is located. Minnesota law requires the beneficiary to be solvent in order to disclaim. A beneficiary receiving Medical Assistance may not disclaim inherited assets.