No Thanks: What Happens When a Beneficiary Refuses a Bequest?
When most people create an estate plan, they do so with the idea that the money and property they pass on will be a welcome benefit to their loved ones. In some cases, however, the recipients don’t wish to receive the gifts they have been given. Although it might be difficult to imagine why a person would decline an inheritance, it does happen.
Known as a “disclaimer”, the act of refusing a gift is more common than you might think. It can occur with a will, a trust, or through intestate succession (when a person dies without a will or trust). Disclaimers are also why it’s important to name an alternate beneficiary in your estate planning documents.
Reasons for Disclaimers
There are numerous reasons why a person might choose to decline a gift. Common scenarios include:
· Real property that is burdened by tax debt or is in poor condition. The cost of repairs and maintenance would be a financial drain on the beneficiary.
· The recipient is facing bankruptcy and might lose the property or funds.
· The recipient is planning a divorce and does not wish his or her family to lose the property.
· The recipient is financially secure and wishes someone else to receive the gift.
· The property doesn’t interest the recipient and might be a burden (example: a large collection of porcelain dolls gifted to an individual who dislikes or fears dolls).
As the old saying goes, “One man’s trash is another man’s treasure.” In the case of disclaimers, however, this isn’t always the case. When possible, discuss your bequests with their intended recipients. This is especially critical if you plan on leaving a large piece of property or significant assets to your loved ones. In some circumstances, the intended beneficiary may not have the ability or willingness to manage the gift. In other cases, the tax consequences of an inheritance make disclaimer necessary. Because it’s not always possible to predict whether a beneficiary will welcome an inheritance, it’s also a good idea to name an alternate.
What Happens Next?
When a beneficiary disclaims a gift, he or she is not entitled to name who should receive it. Instead, the gift goes to whomever is named next in the estate document. In the absence of an alternate beneficiary, the property passes according to the rules of intestate succession.
Minnesota Estate Planning and Probate Law Firm
Have questions about your estate plan? Call the Minnesota probate and estate planning attorneys at Jeffrey P. Scott & Associates, LLC today at (651) 968-1457 today to learn more and to discuss your options.
This website has been prepared by Jeffrey P. Scott & Associates, LLC for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.