Make It Easy for Your Heirs to Say “No”

10:29 am Current Events, Estate Planning

People have been known to do crazy things when taxes are as unpredictable as they are currently. No, we don’t mean “offing” their relatives (although there have been plenty of those kinds of jokes going around this year), we’re talking about saying “No thanks” to an inheritance (also called disclaiming.) This article in Investors.com explains that “By disclaiming, one heir can abstain from taking an inheritance, leaving the assets for other beneficiaries. Planning in advance for such a move can save huge amounts of estate tax. That means more money for heirs.”

We realize that with no estate tax in 2010, disclaiming an inheritance is not a likely scenario this year; but next year the tax is expected to come back, although at what rate or with what exemption is still anybody’s guess. That means there are plenty of reasons why someone might want to pass on a large inheritance, including:

  • To pass the benefit of the inheritance on to another family member (generally a younger family member who could use the money for college, a first house, etc.)
  • To avoid passing the inheritance directly on to creditors if the initial beneficiary is in debt or involved in a lawsuit.
  • To avoid being bumped into a higher tax bracket.

The best reason to account for the possibility of disclaiming in your will or estate plan is that it provides your heirs with flexibility. “Even if a new estate tax law is passed, uncertainties will remain. You don’t know when you’ll die. You can’t know for sure how much you’ll be worth. Congress may create new exemptions, tax levels and other rules.”

You never know what the future may hold—for you or your heirs. When in doubt, it pays to make provisions for any eventuality.

One Response

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