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How to relinquish an inheritance as a beneficiary

An estate plan may allow individuals to combat the high cost of estate taxes more effectively by relinquishing an inheritance to the secondary beneficiary. Generally, this move allows funds to enter into a trust.

In other cases, someone may waive their rights to an inheritance to allow others to benefit from a deceased person's wealth. No matter the reason, waiving your right to an estate is a simple process requiring only a few moment's work.

Review the estate documents to ensure there is a contingent beneficiary. If not, you may end up inheriting the property anyway in accordance with state law. When you deny your right to an inheritance claim this will be an irrevocable decision. Meet with an attorney and the representatives of the estate of which you've become beneficiary before proceeding.

Check the calendar. You must disclaim your inheritance within nine months of the time it became transferrable to you unless you're under age 21. If it's been more than nine months, you are not allowed to disclaim your inheritance and most accept responsibility for the property. If you're younger than age 21, you have until nine months after your 21st birthday to deny your estate claim.

Avoid taking possession of any property in the estate. If you accept any portion of your inheritance you cannot disclaim the remainder. You'll be subject to any estate tax on your inheritance and applicable income taxes on qualified accounts such as Individual Retirement Accounts.

Review the contents of the estate. If any portion is a qualified plan, such as an IRA, you'll need to write a Qualified Disclaimer Letter. List the name of the qualified plan, the name of the participant, date he died, and that you're disclaiming the property in accordance with the provisions of Section 2518 of the Internal Revenue Code.

Write out and notarise a letter disclaiming your inheritance interest in the estate. If you are named in a trust as beneficiary, list the name and date of the trust you are disclaiming in your letter. If you are disclaiming the estate of an individual, list the full name, date of death, and your relationship to the person on your letter. You may not direct who will receive your portion of the estate, so don't include any directions in your document.

Request a receipt of your disclaimer letter from the estate administrator. Keep this in your files to ensure that you can prove that you've disclaimed the estate and are not subject to any penalties or fees applicable to the beneficiary.

Things Needed

  • Estate plan
  • List of deceased's qualified plans