Should I disclaim my Inheritance? When It’s Right to Say No
Florida law allows a beneficiary to “disclaim” any interest in or power over property that has been left to them. A disclaimer is a legal tool to refuse the acceptance of an interest in or a power over a property, governed by a series of statutes called the Florida Uniform Disclaimer of Property Interests Act, and by relevant federal tax law.
Disclaimers are based on the general legal premise that no person should be forced to accept property against their will. But, why would someone want to disclaim? There are several reasons a person may not want to keep their inheritance, or ensure that the property doesn’t even pass to them in the first place. Common justifications for a beneficiary disclaiming their interest in property include wanting to pass down the inheritance to someone else (i.e. a child or grandchild), to avoid certain taxes that would attach if the inheritance was accepted, if accepting the inheritance would impact their ability to qualify for federal benefits, for creditor protection, or even because inheriting assets could complicate their own estate planning.
Regardless of the reasons why, a disclaimer is an important tool in Florida law that must be executed carefully and properly to be effective.
How does a Beneficiary disclaim?
For a disclaimer to be valid and enforceable under Florida law, it must;
- Be in writing;
- Declare that it is a disclaimer;
- Describe the interest or property disclaimed;
- Be signed by the person making the disclaimer;
- Witness and acknowledged;
- Filed or delivered in the manner provided for by statute;
Although disclaimers are governed by state law, a disclaimer may have federal tax implications. In order for a disclaimer to be considered a “qualified disclaimer,” property must be disclaimed within nine months of the date the property is transferred to the disclaimant or otherwise meet the requirements of 26 U.S. Code section 2518. The benefit of a qualified disclaimer is that the property will never enter into the disclaimant’s estate, and thus not be subject to transfer tax or be subject to the disclaimant’s creditors. You can still disclaim property after the nine-month period, but the disclaimer will not be considered a “qualified disclaimer.”
What happens to disclaimed property?
The short answer- it depends. Essentially, a disclaimer means that the transferred property bypasses the intended recipient, and instead passes it on to the next person in line. Disclaimer law operates as if the disclaiming beneficiary has predeceased the transferor who gave them the property. The disclaimed property or interest passes according to the terms of the instrument that created the interest. In other words, the property will pass to whoever the remainder beneficiary or beneficiaries who would receive the property as if the disclaimant had died predeceased the inheritance.
This is an important point – a disclaimant cannot control what happens to the property after it is disclaimed. Issues can arise if the disclaiming beneficiary does not pay close attention to the document creating the interest. The testator or settlor of the trust transferring the property may have named alternative people to receive disclaimed property or created a trust with different beneficiaries that is designed to take property disclaimed from the will or trust. Crucially, a disclaimer is irrevocable. This means that a person who disclaims cannot simply undo this action later on.
Should you consider disclaiming inherited property? This decision should be made with the help of an experienced estate planning attorney to determine whether there may be some benefit to a disclaimer, to ascertain that all potential consequences are considered, and to ensure that all legal requirements are met. If you have questions about the options available to you when inheriting property or real estate investments, the attorneys at Chepenik Trushin LLP can help you make the best decisions for your family estate circumstances. Bart Chepenik, JD, LL M 305-613-3548 (always accessible) or Brad Trushin, Esq, 305-981-8889. Call us at (305) 981-8889 for more information, and to schedule a consultation.
 A disclaimer must be filed in accordance with Fla. Stat. §739.104.