It’s one thing for a family member to leave you a piece of jewelry you’ll never wear. It’s quite another for them to leave you a significant asset like a home or even a car that you don’t need and don’t want to deal with. Maybe you believe someone else in your family needs it more.
That’s just one more reason why people should discuss their estate plan with loved ones when they draw it up. That’s particularly true if they’re leaving them a significant amount of money, if they’re not leaving them an inheritance they might be expecting or if they plan to leave them a large physical asset like a home. Making sure a person wants this asset can save everyone a good deal of trouble later.
If it’s too late for that, and you’re the beneficiary of an asset you don’t want, what are your options?
One option is to “disclaim” the inheritance
This basically means you’re refusing the inheritance. You need to sign a qualified disclaimer, which is why it’s called “disclaiming” an inheritance. Under federal tax law and Florida state law, this is necessary to refuse all or part of an inheritance. There are things you attest to when signing a disclaimer – including the fact that you’ve received no benefit from the inheritance.
When handled properly, this disclaimer ensures that you’re not taxed on the property. It’s the same as if you were never the beneficiary. What happens to the asset depends on how the estate plan reads. There might be the contingent beneficiary named, or it may just go back to the estate. The person who disclaims the asset doesn’t have the authority to designate a contingent beneficiary.
Giving the asset to someone else
If you choose to accept the asset and then give it to the person of your choosing – maybe one of your siblings or an adult child – it’s considered a gift. Therefore, it’s important to understand the tax ramifications. In 2021, you can give up to $15,000 worth of assets tax-free to any one person. That increases to $16,000 next year.
If you don’t want an asset you’ve inherited, it’s crucial to let the estate executor and/or the probate court know. It’s also wise to seek guidance from legal and perhaps tax professionals.