When Should You Decline an Inheritance?

Why Inheritance Can Be Problematic

Sometimes an inheritance can create more problems than it solves. A sudden gift might yield assets that create income which will bump someone into a higher tax bracket or make them ineligible for certain government benefits, like Social Security Income, Medicaid or student aid. For someone who already has significant assets, taking on more might even complicate their own estate plans or create estate tax issues for their heirs down the road. And occasionally, a person just does not want or need what has been left to them.

How Can You Refuse an Inheritance in New York?

Whatever the reason, the law gives beneficiaries the right to refuse an inheritance through something called a renunciation. In New York, the rules are found in Section 2-1.11 of the Estate Powers and Trusts Law. To do it properly, the beneficiary has to put the refusal in writing, sign and notarize it, file it with the Surrogate’s Court that is handling the estate, and make sure the executor or administrator gets a copy. All of this has to happen within nine (9) months of the decedent’s date of death.

Although the statute sets forth a nine-month deadline, it is not impossible to refuse an inheritance after the deadline has passed. A beneficiary who misses the deadline may petition the Surrogate’s Court handling the estate for permission to file the renunciation late. The Court determines such petitions on a case-by-case basis.

The Court will consider factors when making its determination such as whether the beneficiary knew about the asset prior to the deadline, or if the asset was not part of the estate until after the deadline passed, The beneficiary must also show that the renunciation does not unfairly prejudice any of the other heirs or creditors of the estate, and that the refusal is being made in good faith.

What Happens If You Decline Inheritance?

The effect of a renunciation is that, for purposes of determining who inherits property, the renouncing party is treated as though she predeceased the decedent. For example, say a provision in a Will states, “I leave the sum of $100,000.00 to Agatha, if she survives me; if she does not survive me, then to Betty.” If Agatha does not want to receive her bequest, she may wish to sign a written renunciation of this interest. If she files the appropriate documents in a timely manner, and serves them upon the appropriate parties, the Court will treat Agatha as though she predeceased the decedent, and the sum will go to Betty.

If You’re Thinking About Renouncing Inheritance, Consult a Professional First

Beneficiaries should consider carefully whether they want to refuse the interest before signing a renunciation. A renunciation, once signed and filed, cannot be revoked. Accordingly, a person seeking to refuse an inheritance should consult with financial advisors or other professionals to ensure they fully understand the effect. Speaking with an experienced estate attorney before the nine-month period expires will ensure both peace of mind and full compliance with the appropriate state law.

In the end, saying “no” to an inheritance might feel counterintuitive—but in the right situation, it can be a thoughtful and financially savvy choice.

By Britt Burner, Esq. and Frank Oswald, Esq.

Britt Burner, Esq. is the Managing Partner, and Frank Oswald, Esq. is an Associate Attorney at Burner Prudenti Law, P.C. Burner Prudenti Law serves clients from New York City to the east end of Long Island with offices located in East Setauket, Westhampton Beach, Manhattan, and East Hampton.