It sounds crazy, but there are many good reasons why someone would not want to receive an inheritance. Making sure that you are not forced to receive assets must be done very carefully, so you’ll need an estate planning attorney on your team.
An estate waiver, also known as an inheritance waiver, releases a person from the right to claim assets in the event of another person’s death. You’ll need such a waiver, if you don’t want to be stuck with state or federal taxes based on the value of the estate, or you don’t want a piece of real estate that is located far from where you live. Another reason for not wanting an inheritance: you may be in the middle of litigation or a divorce and the last thing you want is to increase your assets.
Whatever the reason, this article from Investopedia, “How Inheritance and Estate Tax Waivers Work,” provides some tips to consider when deciding on an inheritance or estate waiver release.
Waiver Form Language. The waiver must have specific words to be considered complete and binding. The heir must state her name, along with the name of the deceased individual. A general waiver of all benefits as to the estate of the decedent is appropriate. However, if any specific items were personally designated to the heir, or if the heir has an entitlement to any items, a waiver should list the specific items being waived. The waiver also should state that the decision is being made freely and without coercion to be legally binding.
The Legal Process. Every state has its own laws that govern wills and estates. As a result, each state has a different set of rules relating to waiving an inheritance or estate. However, generally, the disclaimer must be a written document that is filed with the court having jurisdiction over the estate. The executor of the will must get a copy of the disclaimer. In order for the waiver to be valid, the heir can’t receive compensation or other benefits for agreeing to revoke rights for certain items.
Timing and Taxes. A waiver is typically due up to nine months after the decedent's death. If the deadline passes for filing, the heir must take possession of the distributed assets. Any federal and state estate or inheritance taxes are also due nine months after the date of death. The taxes are calculated based on the taxable estate value, and these taxes must be paid before assets are distributed to the beneficiaries.
Legal Consequences of Waiving Rights. After filing a waiver, the estate’s executor has complete responsibility for the distribution of assets. A waiver can’t direct that another person receives the waived assets. If no additional instructions are outlined in the will, the executor has the discretion to transfer the items to another individual, to an entity not listed in the will, or to a charitable cause. The probate court has to okay these types of transfers.
An estate planning attorney from your state will know the laws governing how waivers work. The language or actions required vary from state to state, and some laws are based on the relationship between the heir and the deceased. Eighteen states have restrictions on the use of waivers, and in many cases, these are related to the date of death. Your Houston estate planning attorney will help guide you through the process.
Reference: Investopedia (October 1, 2018) “How Inheritance and Estate Tax Waivers Work”