When Does It Make Sense to Say ‘No’?

Many people wouldn’t dream of giving up an inheritance. After all, a sudden windfall may help them reach some of their financial goals, including getting out of debt or saving for retirement. But, it may make more sense to decline it, especially if the inheritance pushes you into a higher tax bracket or if you simply want someone else to inherit it.

Reasons for Declining an Inheritance

Declining an inheritance may seem like an unusual move. So, if you decide to proceed, you can use a qualified disclaimer to refuse an inheritance. But why would you? The following are some of the most common reasons why you may not want to accept one.

Disclaiming may make sense if you are already heavily exposed to income and estate taxes, according to Keith Atneosen, principal and family business advisor at Freedom Summit.

Some common reasons why you would disclaim an inheritance include:

• You want someone else to benefit. You can reject the inheritance if you want someone else, including a sibling, to take possession of the assets instead.
• You’re already financially stable. You may not need the assets or money from an inheritance because of your financial situation.
• You don’t want to deal with tricky or complicated assets, such as vacation homes, that may take time to dispose of or sell.
• Avoiding family conflict. A death, will, and inheritance may cause tension among family members, so you may decide to disclaim it to keep the peace.

You simply may not want the inheritance. This may be for personal reasons, which is very valid.

Legal and Tax Implications

Before you disclaim an inheritance, you should consider some of the legal and tax implications.

Legal Implications

You may have your reasons for declining an inheritance. However, you should understand that if you refuse an inheritance today, you cannot reclaim it in the future. Put simply, a disclaimer is irrevocable, which means you can’t change your mind or claim the inheritance if your situation changes. You also give up the asset or any benefits from it.

Additionally, you’ll have no power to decide where the inheritance goes after you decline it. The assets are passed down to the next beneficiary if one is listed in the deceased’s will. If there is no beneficiary, they are passed on to the estate.

“If there are no estate documents [such as a will], it could be subject to probate court in the state of the decedent,” Atneosen said. This probate process involves reviewing and analyzing the deceased’s assets and documents in probate court. The length of time depends on the state, but the average is generally six months.

Tax Implications

You avoid any of the tax implications that might come with accepting an inheritance. For instance:

• You avoid paying taxes on income-generating assets you inherit.
• You pass any tax implications on to the new beneficiary.
• You reduce the potential for estate taxes passed on to your beneficiary(s) after you die.

Procedure for Disclaiming an Inheritance

Writing a disclaimer involves a process. You have nine months from the date of the deceased’s death to do so.

If you intend to decline an inheritance, you must do so in writing. This written notice must include what you are disclaiming, whether you choose to decline the entire estate or just certain parts. The document must be signed to ensure that the refusal is legal. Once complete, it must be sent to the executor or the estate’s representative.

Although you can do the disclaimer yourself, Atneosen says to be careful, as there may be legal risks if you don’t work with an attorney. “It’s best to engage with an attorney licensed [in] your state of domicile,” he said.

Impact on Estate Planning

You can use a disclaimer as a flexible estate planning tool, especially when you’re unsure of what will happen in the future.

For instance, your beneficiary (maybe your spouse) can’t decide where any inherited assets will go if they complete a qualified disclaimer. Since you don’t know if this will happen, you can outline in your will what happens to your assets if your beneficiary decides to refuse the inheritance. This can include naming additional beneficiaries or passing the assets on to a trust.

Speak to an estate planner, lawyer, or financial expert to get the best advice on how to deal with any scenario.

Examples and Case Studies

Here’s a hypothetical example to show how disclaimers work. Imagine Mr. X has a traditional IRA worth $250,000, two properties (a primary and income-generating vacation residence) valued at $300,000 each, a checking and savings account with a combined value of $30,000, and a car worth $15,000. The total value of his estate is $895,000.

Mr. X leaves his entire estate to his adult daughter. If the daughter doesn’t want the tax implications associated with her father’s IRA (she would have to take withdrawals over 10 years after his death) and the income from the vacation home after he dies, she can complete a disclaimer within nine months indicating her refusal of those assets. These assets will pass on to the next available heir. If she wants, she can keep the primary residence, checking and savings accounts, and the car without paying taxes.

The Bottom Line 

Although disclaimers aren’t uncommon, they aren’t unusual. People with large net worths who stand to inherit valuable assets may use them to avoid heavy tax implications. Disclaimers must be made in writing within nine months of the decedent’s death. Keep in mind that once you refuse an inheritance, you are legally bound by the disclaimer. This means you cannot benefit from or reclaim any disclaimed assets in the future. Be sure to speak to a financial or legal professional so you know where you stand.

Correction—April 16, 2025: This article has been updated to correctly assert that estates are responsible for the estate tax.