You’ve just found out that you are going to receive an inheritance. A loved one or a friend has left you a bequest as part of their estate…what a wonderful gift. While it seems unlikely, there are situations where it makes sense for a beneficiary to not receive their inheritance. Why would someone do this and what are the consequences?
Reasons we’ve seen why some beneficiaries disclaim an inheritance:
If there’s a concern an elderly beneficiary might need nursing home care sometime in future, it would make sense for that person to disclaim the inheritance. Depending on the relationship with the other beneficiary(ies), these monies can be gifted back to the disclaiming party at some future point. Wills can also be set up to allow a surviving spouse to disclaim the inheritance. The inherited proceeds would be moved into a protected trust for the benefit of the surviving spouse while at the same time sheltering the assets from creditors and/or remarriages.
Creating a taxable estate
In Massachusetts, the estate tax threshold is $1 million. Once you hit this threshold, the entire amount may be subject to the estate tax. Sometimes it makes sense to disclaim an inheritance and let it pass to the next beneficiary(ies) in line, assuming they have a lower tax rate.
Correcting an outdated will
Wills created decades ago don’t always hold up against the passage of time. Changes in family, assets, or personal values may not be reflected in an old will. Disclaiming can sometimes correct an obvious omission or help a child that may not be as well off financially.
Honoring a decedent’s verbal change
Sometimes a person in the last stages of life decides to change who gets what. Often, these deathbed wishes are not incorporated into the decedent’s estate documents. Disclaiming is sometimes a useful tool to achieve the decedent’s last wishes.
For a disclaimer to be effective in Massachusetts, it must be in writing and filed with the Probate Court no later than nine months from the date of death. Keep in mind, a disclaimer cannot be made after the beneficiary has already accepted or exercised ownership over the inheritance. For example, if the beneficiary had the decedent’s bank account retitled into her name, she cannot subsequently disclaim the asset.
Disclaimers can be complicated. Before you disclaim, you should carefully consider how this will affect the next recipient. If the next recipient is on government assistance, such as, MassHeath, Social Security Disability, etc., receiving an inheritance could disrupt their benefits. Disclaiming might be an appropriate strategy in some situations, but you should speak with a competent estate planning or elder law attorney before choosing this option.
Founded by a nurse attorney and with offices in Acton, Burlington, and Sudbury, Massachusetts, Generations Law Group helps families navigate the complex areas of estate planning and elder law to inform and protect loved ones of every generation.