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What is a Disclaimer in the Estate Planning Process?

_ July 19, 2022

A disclaimer is a document that you file with the probate court if you are an heir to an asset and, for various reasons we will discuss later, you do not want. If you file a disclaimer with the court, you are putting the world on notice that at least in the eyes of the law, you want to be treated as if you died prior to the decedent. It's important to note that you can disclaim your entire inheritance or a specific item of the inheritance. There is an important timing factor with respect to disclaimer: you must file the disclaimer within nine months of the decedent's death. Another point to keep in mind is that if you disclaim the asset, you do not have the power to choose to whom the asset goes to – the terms of the will or trust will dictate to whom the asset is given. So, it is important to determine who will receive the assets if that is of some concern to you in your disclaimer decision. if there is no will or trust then the intestate laws of your state will determine to whom the assets are distributed to.

Let's discuss why you would want to disclaim an asset. After all, one can consider this a windfall that can be spent in any manner. While there are many reasons why a person may want to disclaim that an entire inheritance or assets of an inheritance, I would like to discuss two scenarios in which one might consider disclaiming assets. The first is a situation where a person has a very large estate. Any addition to the estate’s value will cause a potential estate tax liability to be incurred. A person could disclaim the assets thus eliminating the possibility of those assets being included in the estate. A second situation is one in which a person is facing a creditor issue, such as a lawsuit or bankruptcy. Instead of the asset passing to the beneficiary and the creditor taking it, by disclaiming the asset, at least the asset won’t go to the creditor.

As with anything, deciding whether or not to disclaim an asset is a complicated issue. I strongly suggest calling an estate planning attorney to determine if a disclaimer makes sense in your situation.

The information on this blog is for general informational purposes only. Nothing in this or any other communication should be taken as legal advice for any individual case or situation. All information on this site is not intended to create and does not constitute an attorney-client relationship.