Declination of Interest in Wills

By Heather Frances J.D.

Wills generally describe how you want your assets to be distributed after your death by designating specific beneficiaries. But no matter what assets you try to give or whom you want to give them to, the beneficiary you name in your will always has the option to decline the inheritance. State laws vary, but a declination typically requires the beneficiary to take formal steps to renounce the inheritance received.

Wills generally describe how you want your assets to be distributed after your death by designating specific beneficiaries. But no matter what assets you try to give or whom you want to give them to, the beneficiary you name in your will always has the option to decline the inheritance. State laws vary, but a declination typically requires the beneficiary to take formal steps to renounce the inheritance received.

Disclaimer

When a beneficiary renounces his legal rights to a bequest in a will, or otherwise declines an inheritance, his action is called a disclaimer of interest or renunciation of interest. Generally, such a disclaimer is irrevocable, meaning the beneficiary cannot later change his mind. Once the beneficiary files the appropriate disclaimer paperwork, as required by the state and within the state's prescribed time limits, the disclaimer is effectively made and is a permanent action. As a result, the beneficiary is treated as if he was never named as a recipient of the asset. This is not the same as a transfer made directly from a beneficiary to a third party, although a disclaimed inheritance typically passes to someone else after it is disclaimed.

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Reasons to Disclaim

Beneficiaries have varied reasons for disclaiming an inheritance, including simply not wanting to own the particular asset. For example, if you leave your china set to a beneficiary who doesn’t like the set, he could disclaim the inheritance and let it go to someone who does want it. Beneficiaries may also want to disclaim an inheritance if it negatively impacts their taxes or would likely go to creditors. Beneficiaries who receive public benefits, like Medicaid, might disclaim an inheritance in an attempt to continue qualifying for those benefits, but this may not be effective because a disclaimer typically disqualifies a Medicaid recipient from receiving benefits for a certain period, as determined by state law.

Effect of Disclaiming

The effect of your beneficiary’s disclaimer varies by state law. Some states treat the disclaiming beneficiary as though he died before you, so his share in your estate is distributed to other beneficiaries accordingly. This may result in the disclaiming beneficiary’s share going to his children, which makes it similar to a gift from the disclaiming beneficiary to his children -- but without a gift tax. But some states, like Texas, permit you to make other arrangements in your will to specify to whom a disclaimed inheritance should go. If you don’t want a specific person to inherit any of your assets, you can include language in your will specifying that no inheritance shall go to that person even if a beneficiary disclaims a bequest from you.

Authority to Disclaim

A beneficiary can disclaim his own interest or, if he is underage or mentally incapacitated, his legal guardian can disclaim it on his behalf. Some states, like Montana and Texas, allow a person acting as a beneficiary’s agent to disclaim that beneficiary’s share under the authority of a power of attorney. Many states require that formal disclaimers from someone with authority to act on behalf of another be submitted within a certain period of time, typically within nine months of your death, and disclaimers after that period may not be effective.

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Rights of Primary Beneficiary Vs. Contingent Beneficiary

References

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Laws Regarding Renouncing Inheritance in Louisiana

Louisiana law permits you to fully renounce any inheritance you are entitled to receive. You also have the option of renouncing a portion of the inheritance. A renunciation of your inheritance waives any claim or interest you would otherwise have in the inheritance. The party to whom you should address your renunciation depends upon the terms of the will in which you are a named beneficiary or, in the absence of a will, in accordance with the inheritance laws of the state of Louisiana.

Can a Charitable Remainder Trust Be Set Up by a Will?

A charitable remainder trust is designed to allow you and your beneficiaries to benefit from your assets during your lifetime but give the assets to charity when you die. The creator, or "settlor," of the charitable remainder trust can set the trust up using a will; these trusts are known as testamentary charitable remainder trusts. But will and trust law is state-specific, so the creation and operation of both the trust and will must follow your particular state's laws.

What Is a Universal Heir?

Creating a will gives you the opportunity to dictate who gets what after you die. After paying off your debts, the probate court distributes any remaining assets to your loved ones according to the directions you provided in your will. If you leave all of your remaining assets to one person rather than stipulating that the court divide your assets between more than one party, the beneficiary of the inheritance is your “sole” or “universal” heir.

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