Though it sounds like something that no one would ever choose to do, choosing to refuse an inheritance or gift you receive can be beneficial for you and your family in many situations. The idea of refusing an inherent is not something most people ever seriously consider, but it does happen, and more often than you might imagine. You are never under any legal obligation to accept an inheritance, and can refuse an inheritance or gift as long as you make sure you follow the procedure outlined under California probate law. Though your attorney will explain more about the practical steps you have to take to refuse an inheritance, here are some common questions that many people have about it.
What would make me want to refuse an inheritance?
There is no one single reason why people choose to refuse an inheritance, though there are some reasons that are more common than others. One of the most common reasons is refusing the inheritance because you are either in the process of, or are planning on, filing for personal bankruptcy. There are two main types of personal bankruptcy: Chapter 7 and Chapter 13. Chapter 13 bankruptcies allow you to repay your creditors through a structured repayment plan. Chapter 7, on the other hand, doesn’t have a payment plan. Rather, it eliminates all of your debts by liquidating your assets and using what’s left over to pay your creditors. People filing for Chapter 7 bankruptcy can, and often do, choose to refuse an inheritance or gift because of the nature of the bankruptcy process. In a chapter 7 you will be forced to liquidate all non-exempt assets in order to pay your creditors back. Should you accept a gift or inheritance, your inheritances will also be included in the liquidation. This means that, should you receive an inheritance shortly before bankruptcy or during the process, it is most likely that your inheritance will simply be used to pay back your debts. On the other hand, should you choose to refuse an inheritance, that inheritance will pass to the next heir. Though you won’t receive the money, you will be able to keep that money in the family, and will not be forced to use the inheritance you would’ve received pay back your creditors.
What other reasons are there to refuse an inheritance?
There are several. In some situations, for example, the inheritance left by the decedent is not of the value the decedent believed it to be. Refusing an inheritance in this situation could allow you to honor the wishes of the decedent by ensuring that a more proportionate and fair inheritance gets distributed to the heirs. Beyond the inheritance and fairness issue, there’s also the possibility that accepting an inheritance would make your own estate so large that you have to end up paying estate taxes. In this situation, refusing the inheritance could allow you to keep the money in the family and not have it be subject to taxation.
Latest posts by Timothy P. Murphy (see all)
- Use Trust Protectors for Added Protection and Flexibility - October 13, 2019
- How Will You Obtain the Care You Need? - October 11, 2019
- Income Tax Basis in Estate Planning - October 9, 2019