Saturday Finances—To Inherit or Not to Inherit

I'm not an expert.  I'm just paying attention. 

Update your trust or will every 2 to 3 years

Disinherit v. Disclaim

There are several valid reasons to refuse an inheritance. 

1.  To avoid adverse tax consequences.

2.  Cost of clean-up.

3.  Landlord /tenant pre-arrangement.  Someone is given permission to continue living on property that you've inherited.

4.  Avoid family drama, i.e. multiple heirs, shirt-tail relatives, step-relatives, etc.

5.  Dog of a property.  Hard to sell; contamination or environmental concerns (e.g. mold, rodent infestation, toxic spill, etc.); condemnable structures; undesirable location, etc.

6.  Interference with government aid eligibility, e.g. Medicaid benefits, Supplemental Security Income, Veterans Affairs Aid, etc.

7.  Someone else deserves it more.

8.  The cost of receiving a gift outweighs the benefits.

9.  Avoid creditor claims.

10.  Undesirable vacation property or unwanted timeshare.

Refusing a bequest is a post-mortem legal action initiated by the recipient.  The renunciation of a gift or bequest requires a "qualified disclaimer."

  • The disclaimer must be in writing.
  • The disclaimer must be filed within 9 months after the property is transferred (upon the death of the owner), or in the case of a minor under the age of 21, within 9 months after their 21st birthday. 
  • The disclaimant cannot accept any of the benefits from the gift, such as dividends, rent or interest.
  • As a result of the refusal, the property flows without direction to the next legal heir.  The disclaimant has no say over who will get it.  
Disinheritance is an intentional action taken before a person dies to guarantee that an individual (spouse, child or close relative) who would normally inherit upon the person's death gets nothing.  

It is done by provision in a last Will (which also applies to a will within a trust).  It excludes an heir or next of kin from the right to succeed to the estate of the deceased.

It can benefit an heir who wants to avoid being named as a beneficiary.  Disinheritance releases an heir from all legal obligations related to the estate of a deceased family member.  It is a pre-emptive strike against responsibilities related to funeral expenses, property issues, greedy relatives, and creditors.

The Purpose of Estate Planning

Anyone who has ever administered an estate knows and appreciates what a tremendous gift an updated estate plan is for the surviving loved ones.  

It provides a framework in which to distribute assets fairly and respectfully.  It relieves individual family members of having to make difficult judgment calls, and it helps to avoid both legal and personal conflicts.

It is a legal instrument, not a Hallmark card.  

Estate planning is something you do for your family in order to make things easier (not harder) when the time comes.  It is a useful tool that helps everyone navigate the legal landscape of inheritance, and it provides a directive so that the final wishes of the deceased can be clearly and effectively carried out.

Here are some great tips from NOLO on the practical aspects of estate planning:

Practical Estate Planning: Organize Your Documents by NOLO

Talk About It, Spend It  

Communicating with family members is a critically important part of estate planning.  Without it, loved ones have to rely on memory and hearsay which often results in conflict during an already emotional time.  

Discuss the inheritance arrangements, and be open to the idea that heirs may not want to inherit property that may become a burden after you're gone.   

Here's how to get the conversation started.

If Money Talks, So Should You by Tim Habbershow, Advisor, Family Office Services, 16 April 2015

Tips For Estate Planning Conversations by Fidelity Viewpoints

One way to simplify inheritance is to bestow gifts before you die.  That way, your loved ones can thank you personally, and you can be certain that your gifts are passed on to the right people.  

Work with a financial planner to create a dependable retirement plan that will allow you to live comfortably.  Spend down the rest on experiences and causes that will enhance your life and the lives of others.        

• be smart • be happy •

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