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Take care before saying 'no thanks' to a loved one's bequest

Is it impolite to turn down a gift? Do a search of this question online and you'll find that opinions differ. Some observers say you should always accept with gratitude. Others suggest you factor in the intention behind the gift, or consider what negative implications the gift might hold for the recipient.

That last view is the one that might play the greatest role in comprehensive estate planning. It is something that many might not even consider, but whether you are the giver or the receiver of an inheritance, it makes sense to be clear about consequences if a hand-off occurs. Sometimes it might make sense to just say no thanks by employing the legal tool of a disclaimer.

What's a disclaimer?

When most readers hear this word these days, they probably think about the fine print that appears at the bottom of many ads or a fast-talking announcer. They say things like, "Your results may differ." In estate planning law, disclaimers can provide a certain flexibility over how assets are distributed in the event of your death. It's important to know, though, that the law requires renunciations to be in writing and the renouncer must acknowledge the action by signing off on the document.

If you are the decedent, you might incorporate a disclaimer provision as part of your will. One common application allows married couples to exercise greater control over where some funds go. For example, the couple's plan might specify that if a surviving spouse chooses to disclaim some portion of the estate, that those assets will go to a trust for later use. This could be particularly beneficial as a means to reduce potential estate tax liability.

The tax avoidance benefits might be important for heirs to keep in mind as well. However, renunciation should only follow careful assessment because once the disclaimer is signed, it's irreversible. Also, if the decedent's plan doesn't lay out a plan for the asset in the event it is disclaimed, the determination could be left to the probate process in court.

These examples don't represent all possible disclaimer scenarios – only a few. To be aware of the possible effects declining an inheritance could have, consulting an experienced attorney is always recommended.

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