For some people, an inheritance can help alleviate financial concerns. However, there are times when inherited assets may actually cause more difficulties than they are worth. Reasons for disclaiming all or portions of an inheritance vary by circumstance. Some people may not want to be burdened with a piece of real estate, others don't want to get involved in legal battles such as bankruptcy, and others may want to pass the inheritance along to another person. Whatever the reason, it's important to know the rules prior to disclaiming any inheritance.
Take inventory of all the inherited assets, which may vary from real estate to financial assets, such as cash or retirement accounts. Decide which assets you want to disclaim in their entirety and the ones of which you want to decline a portion.
Write a letter stating the assets you would like to disclaim. Send the letter to the executor of the estate within 90 days to nine months from the time the owner of the estate passed away. You are not able to decide where you would like the inheritance to go; the inheritance you disclaim will naturally go to the next person in line as stated in the will.
Follow up with the executor to ensure the letter was received. If the nine-month deadline passes, you will no longer be able to disclaim the inheritance.
- Disclaiming an inheritance is useful if accepting it would bring you into a higher tax bracket. If you are financially secure, sometimes accepting an inheritance will cost you more in time and taxes than it is worth.
- You cannot benefit from a portion of an inheritance and then decide to disclaim it. Upon receiving notice of the inheritance, you need to decide whether you wish to accept it. Once you notify the estate's executor in writing, your decision to disclaim is irrevocable.
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