Many people will mourn the loss of a loved one, but they often will take solace if the decedent bequests or gifts money or assets to them. Sometimes, however, these thoughtful gestures are actually more trouble for the prospective beneficiary than if they had never received them. In these circumstances, renunciation of the gift may be the smart course of action. This can be done for any reason but is often done for tax purposes.
The renunciation of a gift or bequest is also called “disclaiming a gift," and the refusal is called a “disclaimer.” If an individual disclaims a gift, they do not get to pick who is to receive the gift. Instead, it is as if the initial beneficiary did not exist and it passes on to the next beneficiary in line.
Reasons for disclaiming
Some reasons why one would want to disclaim a gift include:
- Reduce the size of an estate: Perhaps the money or asset is not needed.
- To pass the gift on: Perhaps the next beneficiary in line would receive the gift from your estate anyway.
- To adjust the intended gift’s value: Perhaps the decedent did not understand the actual value of the gift, so the actual result of the gift may not have been intended.
How to legally disclaim for the IRS
The IRS requires the following steps for what it calls a “qualified disclaimer”:
- It must be in writing.
- It must be unqualified and irrevocable.
- The qualified disclaimer must be completed within nine months of the death.
- The gifts disclaimed must be passed without any direction given by the person filing the disclaimer.
- The person filing a qualified disclaimer must not accept any benefits related to doing this.
More guidance may be necessary
Large and complicated estates can be difficult and time-consuming to manage. A wise course of action for those interested disclaiming an inheritance is to consult with a knowledgeable estate law attorney that understands the processes and laws here in Florida. They often can provide the options for address this and other estate law concerns.