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When You May Want to Decline an Inheritance

By Lane V. Erickson, Idaho Estate Planning Attorney

Imagine being named in someone’s Will or trust to receive an inheritance from them and then declining that inheritance. As hard as it may seem to believe, there are actually some very specific times when turning down an inheritance is a good idea.

Even though it doesn’t happen often, it’s important to understand that in Idaho disclaiming an interest in an estate is possible. This is controlled by a statute identified as Idaho Code § 15-2-801 entitled Renunciation.  Specifically this statute states that a person can renounce (disclaim) any inheritance by filing a written document (1) describing the property or interest being renounced; (2) that is signed by the person doing the renouncing; and (3) and that declares unequivocally that the renunciation is being made.

Knowing now that it is possible to renounce an inheritance or any interest in any type or kind of property that would be given through a Will or trust, the next question is why would anybody ever want to do this? Having been an estate planning attorney now for more than 20 years, I can tell you that there are some very specific times and reasons why declining an inheritance is a good idea.

Because of Taxes

The first reason is because of taxes. Without going into all the details, there is at times an inheritance tax that must be paid when a person dies. This happens most often when we are talking about an unmarried individual, which could include someone who has never married, or someone whose spouse predeceased them. In this instance, if the person’ estate is larger than the exclusion amount allowed by the IRS under federal law, then a tax is owed by the estate.

Declining an inheritance is one way some people can make sure that an inheritance tax is either delayed or does not need to be paid at all. To be sure, the circumstances that exist for this to apply are very specific. If you are concerned about this, you should talk it over with your estate planning attorney.

Due to Your Disability or Other Benefits

Perhaps the most common reason for declining an inheritance is when the recipient has qualified for and either is about to or has already begun receiving certain benefits from federal, state, or local government programs. Depending on the circumstances, this could include disability benefits, some veteran’s benefits, and Medicaid and other health program benefits.

Each of these types of programs requires a continuation of eligibility for the benefits to be paid in the future. These eligibility requirements usually limit the amount of money or property that a person can possess at any given point in time. Because of this, if a person who is already receiving benefits also receives an inheritance, they will likely lose the benefits they qualified for.

In most instances, the benefits that person will receive from the program they qualified for will likely, over time, be greater than the inheritance that they may receive. Because of this, in this circumstance, many people will decline to receive the inheritance through the renunciation process described above.

Out of Love

Another reason that a person may decline an inheritance is because they would rather that the inheritance be distributed to someone else. In other words, let’s say for example that you are independently wealthy. Next, your parent dies and leaves an inheritance to you through their written estate plan. The Will or trust that names you as a beneficiary states that if you predecease them your share of the inheritance will go to your children instead.

In this instance, you may not need the money or property from your parents’ estate. As you review the situation, you would rather that that money and property go to your children, rather than to you. Because of this, if you decline the inheritance through the renunciation out of love for your children, then that portion of the estate would pass to your children.

There are other types of situations that are similar to this. Although they are rare, they do come up from time to time and they are a good reason to decline an inheritance.

I hope this article has been helpful to you. If you have any questions or concerns, please contact us. We have helped numerous clients through every aspect of the estate planning and probate process, and we are confident that we can help you too!

Enlist an Idaho Estate Planning Attorney to Help You

Our team of Idaho lawyers can help you with any of your estate planning or probate needs. Whether you are seeking to create or review an estate plan for yourself or would like to help a loved one, we are available to discuss your options and answer your questions at an initial free 30-minute consultation. Call us toll free at 877.232.6101 or 208.232.6101 for a free consultation. You can also email us directly at lane@racineolson.com or stop by our office at 201 East Center Street, Pocatello, Idaho 83201. We will answer your questions and help you solve your Idaho Estate Planning problems.

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