Disclaiming a Monetary Inheritance

If a will or trust has left you a sum of money, and you wish to refuse that inheritance, you may do so using a disclaimer. A disclaimer is a straightforward, brief document that simply declares your intent and passes the inheritance on to subsequent beneficiaries. This is an irrevocable step, however, and once you have signed a disclaimer and filed it with the proper authorities, you cannot change your mind. There are important tax and legal rules to follow when disclaiming inherited property.

Notification

If a will or trust document names you as a beneficiary, the executor of the will, or the trustee, of the bequest must notify you. This notification comes before any money is transferred to you; therefore, you have time in which to make your decision. The executor/trustee needs to schedule the transfer of assets with your cooperation. If you are already in possession of the money – as a joint account holder with the deceased, for example – you may not disclaim the inheritance.

Disclaimer Document

To disclaim an inheritance, you must draw up a simple document, title it “Disclaimer” or “Notice,” and state that you are unconditionally refusing the money and wish to pass it on to a subsequent or contingent beneficiary. The disclaimer must identify the will by its date and author; you must also have it witnessed and notarized. By IRS rules, you must execute the disclaimer within nine months of the death of the testator -- the individual who named you as the beneficiary. Otherwise, the money is legally yours and your responsibility.

Service of Disclaimer

You need to file the disclaimer in the court that is probating the will, by mailing it to the court clerk by certified mail or presenting it in person to the clerk's office. The probate process is necessary in order to legally sanction the terms of the will, and deal with any contests or disputes. If you inherit the money from a trust that will avoid probate, you must provide the trustee with a copy of the disclaimer, either by process server or certified mail. If you have an attorney handle the disclaimer, then he will carry out service of the disclaimer to the proper party.

Legal Considerations

State law governs estates, inheritance and disclaimers, while federal law governs federal income, gift and estate taxes. You may not direct the inheritance, or income derived from the inheritance, to another individual. The money will go to the subsequent beneficiary named in the will. It’s important to remember that you can’t revoke a disclaimer, and if you have already taken possession of the money, earned income from it, or otherwise handled it or put it to use in any way, you may not subsequently disclaim it. In addition, state laws provide that you may not disclaim an inheritance if you are on public assistance.