It’s not uncommon for people to leave an inheritance to someone who has no need or desire to have it. Most of these things are easy enough to give away, donate, sell or just stow away in a closet. Maybe your grandmother left you her fur coats, which you find repulsive. Animal shelters will sometimes take those and use them for warm bedding. Perhaps your father left you his (mostly broken) antique watch collection that you have no interest in. That’s easy enough to get appraised and sell.
Larger, more valuable assets like homes, boats, vintage cars and artwork can be more time-consuming and complicated to sell off if you don’t want them. Keeping them can cause unwanted tax consequences.
How does “disclaiming” work?
You have the option to “disclaim” the inheritance. However, that’s not as simple as saying “No, thanks” and ignoring it. This needs to be done according to Kentucky law and IRS rules.
To be able to disclaim an asset, the IRS requires that it be handled appropriately to avoid tax consequences. For example, to disclaim an asset, you may not:
- Have benefitted from it or any proceeds it may have generated before disclaiming it
- Get it back “under the table” after disclaiming it to avoid taxes
- Determine or try to influence who gets it instead of you
Under probate law, a disclaimed asset is treated as though the beneficiary predeceased the decedent. If they listed a contingent beneficiary who’s still alive, it will go to them. If not, it typically is returned to the estate to be part of the residuary estate that gets distributed as the decedent wished.
Although a person has nine months under the law to disclaim an inheritance, it’s best to let the estate’s personal representative (executor) know about your decision as soon as possible. You’ll also need to file a form with the court and provide a copy to the personal representative. If the property you’re disclaiming is a home or other real estate, the county clerk will also need a copy.
Disclaiming a large and potentially high-maintenance asset can be much easier and less costly than keeping it. However, as outlined here, it needs to be done correctly. It can be helpful to have experienced legal guidance.