Reasons to Disclaim
One of the primary uses of disclaimers is to avoid federal estate tax issues. Parents who leave property to their already well-off children with good intentions sometimes create future estate tax problems for their grandchildren. If the children disclaim the property, it can often pass directly to the grandchildren without as many tax issues. Because the estate tax law changes frequently, you should speak with an estate-planning attorney to determine if a disclaimer is appropriate in your situation. Another reason to disclaim an inherited property is when keeping the property might cost more than its worth. For example, you might want to disclaim real estate with more debt attached to it than equity.
Timing and Qualifications
If you are disclaiming property because of federal estate tax issues, you must usually do so within nine months of the grantor's death. States have different laws concerning how long you have to disclaim property. If you want to disclaim property, you cannot accept the property and later disclaim it. You also cannot receive any benefit from the property before disclaiming it. For example, if the property is a stock portfolio, you cannot cash a dividend check; if it's real estate, you can't accept any rent if you intend to disclaim it.
The exact language you need to use depends on the laws of the state with jurisdiction over the estate and the type of property you want to disclaim. You should check with an attorney for the specifics language you need to use. Generally, however, you need to state your name, the property to disclaim and the extent of the disclaimer. For example, if you want to fully disclaim real estate, your disclaimer might state, "I, John Doe, fully disclaim all rights, titles, benefits and other interests in the real property located at 4567 Homestead Drive, Anywhere, Texas 00000-0000."
Delivering the Disclaimer
To make the disclaimer effective and final, you must deliver it to the proper person. This is also a matter of state law. In most cases, the disclaimer must be signed and delivered to the estate executor or personal representative. Some states require filing the disclaimer with the court having jurisdiction over the estate. If you are disclaiming real estate, you will also need to file the disclaimer with the register of deeds in the county where the property is located.
What Happens to the Property
After you disclaim a piece of property, it will go to the next in line to inherit under the terms of the will or in accordance with the laws of intestate succession in your state. A well-drafted will has a remainder clause that sets out who gets property in case of disclaimer or when the property is not mentioned in the will. This is the person who will inherit the property. In cases where such a clause does not exist, or everyone mentioned in the clause disclaims the property, the law of intestate succession determines who inherits the property, which is usually based on how close relatives are to the deceased.