How to Disclaim an Inheritance?

Most married couples plan their estates to leave their assets to their surviving spouse. In this way, they can use the unlimited marital deduction. Using the unlimited marital deduction will reduce the size of the decedent's estate and reduce estate taxes. However, this may mean that the deceased spouse neglected to take advantage of his or her exemption equivalent, which was 3.5 million dollars for 2009.

If a surviving spouse doesn't need the estate assets to support him/her financially, then he/she may think about filing a qualified disclaimer. Filing an asset disclaimer for tax purposes is equivalent to acting as though the person never owned them.

There are restrictions and guidelines you must follow when filing a qualified disclaimer. Otherwise, the assets will be treated as personal property given to the next beneficiary and will be subject to gift taxes.
You must file the disclaimer in writing. You must file it within nine months of the death of the original owner of the assets.

If it is a minor beneficiary wanting to disclaim the assets, the disclaimer cannot be enacted until the beneficiary reaches the age of majority.
The individual filing the disclaimer cannot benefit from the proceeds of the disclaimed assets. He cannot take indirect possession of the assets by having them passed on to them by a third party.

The asset disclaimer is irrevocable. You can't come back later, when you might be in financial need, and attempt to claim the assets.

The individual filing the disclaimer does not get to determine who receives the assets. The assets will pass to the next beneficiary in line, as if the filing individual had died.

In case of the death of the next beneficiary, state law will prevail in the determination of who is to receive the assets of the decedent.
Before you file a qualified disclaimer of assets, you want to be absolutely positive that you will not need those assets now or at any time in the future. They will pass by you and on to the next beneficiary following you in line, and you lose any claim to those assets whatsoever. This is a big decision to make, especially in turbulent financial times.

Do not go into this decision lightly. It is highly recommended that you discuss this matter with a tax professional or estate expert before embarking on this course of action. In this way, you will be certain to have considered all the benefits and drawbacks of filing a qualified disclaimer and how such a disclaimer will impact your financial status, before going into it.

Sometimes you may not be interested in claiming the inheritance for your own reasons. In such a situation, you can file a disclaimer and leave the inheritance to the other descendants. How to do it? What are the consequences? Chintamani Abhyankar provides valuable tips.

Chintamani Abhyankar, is a well known expert in the field of finance and taxation for last 25 years. He has written many books explaining inside secrets of the magic world of personal finance. His famous eBook Stop donating your money to IRS which is now running in its second edition, provides intricate knowledge and valuable tips on personal finance and income tax.