If you were named in a will or trust to receive an inheritance and the attorney asked if you wanted to disclaim or refuse the gift, you would probably say that was a bad idea. There are times when a valid disclaimer is the best course of action.
WHAT IS A DISCLAIMER?
A disclaimer is an irrevocable and unqualified refusal to accept an interest in property. The effect of a disclaimer is to pass the asset to those who would have inherited if you had predeceased. This is not a gift from you. You have effectively skipped a generation and passed the asset to the next generation.
WHY WOULD ANYONE WISH TO DISCLAIM AN INTEREST IN PROPERTY?
Generally, disclaimers are exercised to redirect property to the next generation. For example, if a parent died leaving all of his or her property to a child who is terminally ill, it may be to the advantage of that terminally ill child to disclaim the property so that the property would go directly to his children, rather than pass through his estate. The same result may be desirable in the case of a child whose estate is already substantial. The child may prefer to have the property pass directly to his or her children. There is a generation skipping tax but only for very large estates.
WHO WILL RECEIVE THE PROPERTY IF IT IS DISCLAIMED?
Basically, the people that would inherit are those next of kin set forth under the law of intestate succession. This is statutory and absolute. One needs to be very careful before any disclaimer is filed to be sure that it legally goes where they want it to go.
CAN A PARTIAL DISCLAIMER BE FILED?
Yes. If you receive all of the estate, you can elect to have a portion of the estate pass to your direct legal heirs. For example, if your spouse had the family farm as an asset in his estate, you could identify the property, file the disclaimer in the probate court and the recorder’s office and have the farm pass directly to your children without being a part of your estate.
A disclaimer can be a valuable estate planning tool. At the estate planning stage, this subject should be discussed and a plan put in place for its possible use. If you are administrating an estate or trust, the subject of disclaimer should immediately be discussed with any potential heir to allow the correct decision to be made. A disclaimer cannot avoid nursing home expenses unless it is made more than five years before Medicaid is requested.
This is another planning tool that can be very beneficial for the right factual situation. You will need the assistance of an attorney to perfect the process.
Jeff Roth is a partner with David Bacon and associate Jessica Moon of the firm ROTH and BACON with offices in Port Clinton, Upper Sandusky, Marion, Ohio and Fort Myers, Florida. All members of the firm are licensed in Ohio and Florida. Mr. Roth’s practice is limited to wealth strategy planning and elder law in both states. Nothing in this article is intended for, nor should be relied upon as individual legal advice. The purpose of this article is to provide information to the public on concepts of law as they pertain to estate and business planning. Jeff Roth can be reached at firstname.lastname@example.org (telephone: 419-732-9994) copyright Jeffrey P. Roth 2014.