You have undoubtedly heard stories about heirs launching extended court battles over estate assets, even when those assets have relatively little monetary value. You may have wondered why people invest so much time and money litigating a decedent’s estate. Knowing that they do, however, makes it even harder to contemplate why someone might want to reject an inheritance. Surprisingly, people reject an inheritance more often than you might imagine. Toward that end, the attorneys at Wilcox Attorneys, PA discuss whether you can reject an inheritance in Arkansas and if so how to properly do so.
Why Would I Want to Reject an Inheritance?
No one wants to experience the death of a loved one just to get an inheritance. Conversely, why would you ever want to turn down a free gift offered to you? At first glance, you may not be able to think of a good reason to turn down an inheritance; however, there are several compelling reasons why you might choose to reject (legally known as “disclaim”) an inheritance, such as:
- Tax consequences. While all estates are subject to federal gift and estate taxes, some states also impose an estate tax and/or an inheritance tax. Gift and estate taxes are paid by the estate prior to assets being distributed to beneficiaries and/or heirs of the estate. Inheritance taxes, however, are paid by the recipient after the assets have been distributed and received by the beneficiaries/heirs. Even if the inheritance is not immediately taxed, future tax implications might be problematic. As such, it can make more sense to disclaim and inheritance and allow it to pass to the next in line if that is your child because he/she may be in a much lower tax bracket.
- Financial difficulties. Imagine that you ae deeply in debt already and that an inheritance would almost certainly be lost to creditors. In that case, rejecting the inheritance makes sense. Be careful, however, if you are in the midst of a bankruptcy proceeding because disclaiming an inheritance during bankruptcy can create legal issues.
- Problematic real property. Inheriting real property that will cost you a fortune to repair or improve can be more of a headache than it’s worth. The same can be true if the property is contaminated or otherwise unlikely to be approved for building on in the near future.
- Loss of assistance. If you rely on government assistance programs like Medicaid, Veterans Aid and Attendance, or Supplemental Security Income (SSI), a lump sum inheritance could cause you to lose your eligibility for benefits. Unless the inheritance is substantial, it may not be worth the loss and consequential need to re-qualify.
- Moral considerations. Sometimes, it’s a matter of doing the right thing. If you know that the decedent failed to update their estate plan to add a new spouse or child prior to passing away, you might choose to disclaim your inheritance simply because you know that the inheritance should go to someone else.
How Do I Disclaim (Reject) an Inheritance in Arkansas?
If you decide to disclaim an inheritance, a simple verbal declaration won’t suffice. The law requires a written disclaimer. Before taking this step, it’s essential to consult with an experienced inheritance planning attorney for several reasons:
- Legal requirements. A valid disclaimer must meet specific requirements, including being in writing, containing the correct language, and being delivered to the appropriate person within a designated time frame.
- Outcome of rejection. You need to be certain about who will inherit the assets if you disclaim your share.
- Procedures. Certain actions you take might prevent you from disclaiming your inheritance successfully.
- All or nothing. The disclaimer must encompass the entirety of your inheritance.
- Irrevocable. A disclaimer is irrevocable. Once you’ve disclaimed your inheritance, you cannot alter the course of what happens next.
Do You Have Questions about How to Reject an Inheritance in Arkansas?
For additional information, please sign up for one of our FREE estate planning webinars. If you are contemplating rejecting an inheritance in Arkansas, contact the experienced Washington County, Fayetteville, Springdale, Rogers, Bentonville, and Northwest Arkansas estate planning attorneys at Wilcox Attorneys, PA by calling 479-443-0062 to schedule your appointment today.
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