The idea of giving up an inheritance might sound foolish, but in certain circumstances it can be a beneficial estate planning tool. While we as estate planning attorneys try to prepare for every possible outcome at the time of a death, there is no way to predict the timing of a death, the laws at that time, nor the assets a decedent will actually hold at death. Especially in today’s environment where COVID-19 has shocked our economy, the tax laws could change at any time.
A disclaimer or a renunciation is a refusal to accept an interest in property. No one can be forced to receive a gift or bequest; everyone has the right to either accept or refuse what is given. In certain situations, disclaiming may be more beneficial than actually receiving the gift. If the beneficiary of a decedent’s estate disclaims an asset passing to the beneficiary (the “disclaimant”) as a result of decedent’s death, the asset passes to the next-in-line beneficiary as if the disclaimant had predeceased the decedent.
Under federal law, a “qualified disclaimer” is an irrevocable and unqualified refusal by a person to accept an interest in property so long as the following requirements are met: