refusing inheritance

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dgm
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refusing inheritance

Post by dgm » Mon May 13, 2019 11:27 pm

hi bogleheads

here is a strange question a friend asked me that i didn't know the answer to

1. my friend's parents will leave an inheritance (well under any amount that would trigger estate tax issues)
2. parents wish to split it equally amongst their two kids. partly through laziness of not wanting to think about death and partly so feelings are not hurt (they want to treat all children the same)
3. my friend has done well financially and the inheritance will not make a difference to his life and he does not desire it
4. my friend's sibling on the other hand has fared poorly financially, and it will make a big difference

assuming the parents cannot be convinced of modifying the split, is there something the friend can do to ensure it goes to his sibling without triggering tax issues? (for example it seems like taking it and then gifting it to the sibling may cause some unwanted tax consequences or start eating away at gift exceptions?) can he 'refuse it' or 'leave it unclaimed', causing it to pass directly to his sibling?
Last edited by dgm on Mon May 13, 2019 11:56 pm, edited 1 time in total.

mhalley
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Re: refusing inheritance

Post by mhalley » Mon May 13, 2019 11:37 pm

My understanding is that you can refuse an inheritance, but where it goes might depend on state law if they do not put the brother down as contingent beneficiary. So if there are other potential beneficiaries, they would each have a claim on the portion he refuses.
From legalzoom
.For legal and tax purposes, the person who disclaims an inheritance never owns the asset at all, which means he would not be responsible for inheritance taxes, etc. This also means, however, that the person who has disclaimed the inheritance doesn’t get to choose who does get the assets. Instead it goes to the contingent beneficiary as provided for in the will (or in the case of someone who has died without a will, as provided for in the state's laws of intestacy).
Another option is to accept the inheritance and use his part of his estate tax limit to gift the money.

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dgm
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Re: refusing inheritance

Post by dgm » Tue May 14, 2019 1:50 am

thank you. i believe there are no other next of kin so this may be the best option. will let him know

afan
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Re: refusing inheritance

Post by afan » Tue May 14, 2019 5:10 am

It will depend on what the parents' will or trust says.

A common provision might be half to each of two children. If one of the children dies before the parents, or disclaims the inheritance, then that child's share goes to that child's offspring. If that is what the parents' estate planning documents say, then your friend's share would not go to the sibling if your friend were to disclaim.

Many people put charities next in line if a beneficiary does not accept the bequest.

Since the parents are still alive, your friend should find out exactly what the documents say before assuming the disclaimer route would work.

If your friend ended up accepting the inheritance, then friend could use gifts to get the money to sibling. If your friend and the sibling are both married, then the friend and spouse could gift the sibling and spouse $60,000 per year without using up any gift or estate tax exclusion.
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aristotelian
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Re: refusing inheritance

Post by aristotelian » Tue May 14, 2019 6:16 am

He can always accept and give to charity.

J295
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Re: refusing inheritance

Post by J295 » Tue May 14, 2019 6:58 am

1. Google “will disclaim bequest”
2. Facts matter. So terms of Will are important. It would be common for Will to provide that a deceased child’s share goes to that deceased child’s children.

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Wiggums
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Re: refusing inheritance

Post by Wiggums » Tue May 14, 2019 7:07 am

If the parents agree, You could ask them to leave $1 to you that and the remainder to the other son. But most parents won’t do that.

Refusing the inheritance is another option, but maybe a letter of intent from the parents would help. Some thing like we are leaving the money to sons 1 &. 2. Should one son refuse the inheritance, his share will hi to the remaining son.

Edit: correct typos
Last edited by Wiggums on Tue May 14, 2019 7:59 am, edited 1 time in total.

JoeRetire
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Re: refusing inheritance

Post by JoeRetire » Tue May 14, 2019 7:08 am

dgm wrote:
Mon May 13, 2019 11:27 pm
2. parents wish to split it equally amongst their two kids. partly through laziness of not wanting to think about death and partly so feelings are not hurt (they want to treat all children the same)
Laziness?

You feel that if the parents weren't so "lazy" that they would decide they shouldn't treat all their children the same?

To me, that's a very odd thing to believe.

iflyjetzzz
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Re: refusing inheritance

Post by iflyjetzzz » Tue May 14, 2019 7:25 am

If your parents don't want to change their will/trust and refusing the inheritance creates negative results, you can gift your sibling $15k/yr without tax consequences. If you're married, both you and your spouse can gift $15k/yr ($30k/yr total) to your sibling.
Reference: https://www.efile.com/tax/estate-gift-tax/
The gift tax exclusion also rises over time.

NotWhoYouThink
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Re: refusing inheritance

Post by NotWhoYouThink » Tue May 14, 2019 7:25 am

Yeah, you can find zillions of stories about grown-up kids who were filled with resentment for the rest of their lives because their parents left more money to their poorer siblings. So if you want to share with your brother, good for you - but don't blame your parents. You can also find zillions of stories of people who say "I told them I wouldn't mind, but didn't think they'd actually DO IT!!!"

Is there money in IRAs, and if so, how do the beneficiary designations read? Fred and Joe equally, or Fred and Joe equally, per stirpes? Are there grandkids?

not4me
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Re: refusing inheritance

Post by not4me » Tue May 14, 2019 7:33 am

This will come down to the state law of the deceased & how the assets are passed. It sounds as if they have a will, but the will may be silent on certain assets for which they've named him beneficiary. For example, IRA? Maybe a Transfer-on-death? Life insurance? Real estate out of state? Lots of possible wrinkles & a discussion with the right lawyer might serve him well -- certainly if/when the time comes.

Family dynamics vary so widely, but he might want to also consider how this will be perceived by both parents & sibling. Also, whoever might stand to inherit assets from him. Is this something to talk thru & all be in agreement? Or just take care of when the time comes?

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TomatoTomahto
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Re: refusing inheritance

Post by TomatoTomahto » Tue May 14, 2019 7:35 am

JoeRetire wrote:
Tue May 14, 2019 7:08 am
dgm wrote:
Mon May 13, 2019 11:27 pm
2. parents wish to split it equally amongst their two kids. partly through laziness of not wanting to think about death and partly so feelings are not hurt (they want to treat all children the same)
Laziness?
You feel that if the parents weren't so "lazy" that they would decide they shouldn't treat all their children the same?
To me, that's a very odd thing to believe.
I think you should reread what dgm said.

My family had the reverse situation, where a step-parent specified different amounts for kids. 2 of the 4 partially disclaimed to make it more equal, the third didn’t, and the fourth was the beneficiary of sibling adjustment. It wasn’t much, but as one who partially disclaimed, it felt much better that way.
Last edited by TomatoTomahto on Tue May 14, 2019 7:37 am, edited 1 time in total.
Okay, I get it; I won't be political or controversial. The Earth is flat.

goblue100
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Re: refusing inheritance

Post by goblue100 » Tue May 14, 2019 7:36 am

dgm wrote:
Mon May 13, 2019 11:27 pm

4. my friend's sibling on the other hand has fared poorly financially, and it will make a big difference

assuming the parents cannot be convinced of modifying the split, is there something the friend can do to ensure it goes to his sibling without triggering tax issues? (for example it seems like taking it and then gifting it to the sibling may cause some unwanted tax consequences or start eating away at gift exceptions?) can he 'refuse it' or 'leave it unclaimed', causing it to pass directly to his sibling?
Is there some reason the parents don't want to leave all of it to the one who has fared poorly? Substance abuse, for example? The parents may know that too much money may be bad for the poorly performing child.

One option for the successful child is to accept the inheritance as his parents wish, and gift it back to other sibling at 15,000 a year. The gift tax exclusion for 2019 is $15,000.
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Retired2013
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Re: refusing inheritance

Post by Retired2013 » Tue May 14, 2019 7:50 am

iflyjetzzz wrote:
Tue May 14, 2019 7:25 am
If your parents don't want to change their will/trust and refusing the inheritance creates negative results, you can gift your sibling $15k/yr without tax consequences. If you're married, both you and your spouse can gift $15k/yr ($30k/yr total) to your sibling.
Reference: https://www.efile.com/tax/estate-gift-tax/
The gift tax exclusion also rises over time.
+1

It's the parents wishes to leave it to both. Don't push your wishes on to the parents.

Next, how will you feel if they did change the will / trust to have all the money go to the one sibling and then they blow the money in a casino, wild vacations ect? If my sibling was to give me $15k / $30k per year, I'd be ecstatic. That's like an extra Social Security check each month.

Finally, you can leave the balance to the sibling in your will / trust as you desire.

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Sandtrap
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Re: refusing inheritance

Post by Sandtrap » Tue May 14, 2019 7:53 am

Honor parent's wishes.
Accept inheritance with no discussion of otherwise.
Show gratitude for their hard earned funds and acceptance of such.
Gift to sibling when the time comes with no prior discussion as situations in life change.
Avoid: "you said. . . ", "I said. . . ", "you promised. . . ", etc.

Anything can happen in life.
When the time comes, the inheritance may be badly needed.
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TomatoTomahto
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Re: refusing inheritance

Post by TomatoTomahto » Tue May 14, 2019 7:57 am

goblue100 wrote:
Tue May 14, 2019 7:36 am
dgm wrote:
Mon May 13, 2019 11:27 pm

4. my friend's sibling on the other hand has fared poorly financially, and it will make a big difference

assuming the parents cannot be convinced of modifying the split, is there something the friend can do to ensure it goes to his sibling without triggering tax issues? (for example it seems like taking it and then gifting it to the sibling may cause some unwanted tax consequences or start eating away at gift exceptions?) can he 'refuse it' or 'leave it unclaimed', causing it to pass directly to his sibling?
Is there some reason the parents don't want to leave all of it to the one who has fared poorly? Substance abuse, for example? The parents may know that too much money may be bad for the poorly performing child.

One option for the successful child is to accept the inheritance as his parents wish, and gift it back to other sibling at 15,000 a year. The gift tax exclusion for 2019 is $15,000.
I understand the reluctance to leave it all to the one child, even absent spendthrift or substance abuse issues. I have 4 children from 2 different mothers. Presumably the two mothers will bequeath different amounts. The kids have different financial situations. It’s not my job to make things equal overall; it’s my job to tell my kids that I am treating them equally. I fully expect my kids to work things out as they see fit. Just my opinion.
Okay, I get it; I won't be political or controversial. The Earth is flat.

bsteiner
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Re: refusing inheritance

Post by bsteiner » Tue May 14, 2019 8:08 am

A beneficiary may disclaim (refuse to accept) a transfer. Unless the Will (or other instrument such as a beneficiary designation form) provides otherwise, the disclaimed property passes as if the person disclaiming had predeceased the testator or transferor. The person disclaiming can't say how the disclaimed property is to pass.

We do disclaimers in a significant percentage of the estates we handle. They're usually done for tax reasons, but sometimes they're done for other reasons.

The lawyer handling the estate, or the beneficiary's lawyer will prepare the disclaimer. For the disclaimer not to be a gift, it has to be done within 9 months from the date of death (or the date of the transfer if it was a transfer other than at death). Different states have different requirements for filing and serving the disclaimer.

Most likely if the testator has two children and no grandchildren, if one child disclaims, his/her share will go to the other child. But the child considering disclaiming should look at the Will to make sure that's where any disclaimed property would go before disclaiming.

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RickBoglehead
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Re: refusing inheritance

Post by RickBoglehead » Tue May 14, 2019 8:09 am

JoeRetire wrote:
Tue May 14, 2019 7:08 am
dgm wrote:
Mon May 13, 2019 11:27 pm
2. parents wish to split it equally amongst their two kids. partly through laziness of not wanting to think about death and partly so feelings are not hurt (they want to treat all children the same)
Laziness?

You feel that if the parents weren't so "lazy" that they would decide they shouldn't treat all their children the same?

To me, that's a very odd thing to believe.
Not what the OP said. He said they didn't want to think about death, and called that "laziness". I'd call it avoidance.
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miamivice
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Re: refusing inheritance

Post by miamivice » Tue May 14, 2019 8:09 am

iflyjetzzz wrote:
Tue May 14, 2019 7:25 am
If your parents don't want to change their will/trust and refusing the inheritance creates negative results, you can gift your sibling $15k/yr without tax consequences. If you're married, both you and your spouse can gift $15k/yr ($30k/yr total) to your sibling.
Reference: https://www.efile.com/tax/estate-gift-tax/
The gift tax exclusion also rises over time.
You actually can gift up to $11.2 million without tax consequence.

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Re: refusing inheritance

Post by miamivice » Tue May 14, 2019 8:11 am

goblue100 wrote:
Tue May 14, 2019 7:36 am
dgm wrote:
Mon May 13, 2019 11:27 pm

4. my friend's sibling on the other hand has fared poorly financially, and it will make a big difference

assuming the parents cannot be convinced of modifying the split, is there something the friend can do to ensure it goes to his sibling without triggering tax issues? (for example it seems like taking it and then gifting it to the sibling may cause some unwanted tax consequences or start eating away at gift exceptions?) can he 'refuse it' or 'leave it unclaimed', causing it to pass directly to his sibling?
Is there some reason the parents don't want to leave all of it to the one who has fared poorly? Substance abuse, for example? The parents may know that too much money may be bad for the poorly performing child.

One option for the successful child is to accept the inheritance as his parents wish, and gift it back to other sibling at 15,000 a year. The gift tax exclusion for 2019 is $15,000.
The lifetime gift/estate tax exclusion is $11.2 million. If a person is married, this can get increased to $22 million per family. Few folks will have to worry about gift taxes...

miamivice
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Re: refusing inheritance

Post by miamivice » Tue May 14, 2019 8:11 am

dgm wrote:
Mon May 13, 2019 11:27 pm
hi bogleheads

here is a strange question a friend asked me that i didn't know the answer to

1. my friend's parents will leave an inheritance (well under any amount that would trigger estate tax issues)
2. parents wish to split it equally amongst their two kids. partly through laziness of not wanting to think about death and partly so feelings are not hurt (they want to treat all children the same)
3. my friend has done well financially and the inheritance will not make a difference to his life and he does not desire it
4. my friend's sibling on the other hand has fared poorly financially, and it will make a big difference

assuming the parents cannot be convinced of modifying the split, is there something the friend can do to ensure it goes to his sibling without triggering tax issues? (for example it seems like taking it and then gifting it to the sibling may cause some unwanted tax consequences or start eating away at gift exceptions?) can he 'refuse it' or 'leave it unclaimed', causing it to pass directly to his sibling?
The proper thing to do would be to accept the inheritence (parents wishes) and then gift the money to the sibling.

bsteiner
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Re: refusing inheritance

Post by bsteiner » Tue May 14, 2019 9:14 am

miamivice wrote:
Tue May 14, 2019 8:11 am
...
The lifetime gift/estate tax exclusion is $11.2 million. If a person is married, this can get increased to $22 million per family. Few folks will have to worry about gift taxes...
The exclusion amount is scheduled to revert to $5.7 million (indexed) in 2026, so more (but still not very many) people will have taxable estates. Fewer people are disclaiming for tax reasons than when the exclusion amount was lower. (It was $675,000 as recently as 2001.)

About 1/3 of the states have state estate taxes, with rates going up to as high as 20%. Some of them have lower exclusion amounts than the Federal.

There are other reasons besides estate taxes for disclaiming.

In many if not most states, if you have creditors (other than the IRS), and you disclaim, the disclaimed property isn't subject to your creditors.

If a beneficiary's children are the next in line beneficiaries for an IRA, a beneficiary who doesn't need the money might disclaim so his/her children can get a longer stretch.

miamivice
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Re: refusing inheritance

Post by miamivice » Tue May 14, 2019 9:36 am

bsteiner wrote:
Tue May 14, 2019 9:14 am
miamivice wrote:
Tue May 14, 2019 8:11 am
...
The lifetime gift/estate tax exclusion is $11.2 million. If a person is married, this can get increased to $22 million per family. Few folks will have to worry about gift taxes...
The exclusion amount is scheduled to revert to $5.7 million (indexed) in 2026, so more (but still not very many) people will have taxable estates. Fewer people are disclaiming for tax reasons than when the exclusion amount was lower. (It was $675,000 as recently as 2001.)

About 1/3 of the states have state estate taxes, with rates going up to as high as 20%. Some of them have lower exclusion amounts than the Federal.

There are other reasons besides estate taxes for disclaiming.

In many if not most states, if you have creditors (other than the IRS), and you disclaim, the disclaimed property isn't subject to your creditors.

If a beneficiary's children are the next in line beneficiaries for an IRA, a beneficiary who doesn't need the money might disclaim so his/her children can get a longer stretch.
All I was saying is that folks that believe gift taxes are due for gifts above $15,000 are a little mixed up. Nothing more.

Regarding disclaiming, if a parents wishes are that their inheritence be split equally between the children, I think it is ethically and morally wrong to disclaim your portion of the inheritence. There may be very good reasons why the parents believed their children deserved equal treatment and those reasons should be respected.

What the recipient does after receiving the inheritence is purely up the recipient however...

BradJ
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Re: refusing inheritance

Post by BradJ » Tue May 14, 2019 10:12 am

Why not take the money and put it in an account for the sibling's children college fund?

DrGoogle2017
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Re: refusing inheritance

Post by DrGoogle2017 » Tue May 14, 2019 10:17 am

Regifting comes to mind. Just don’t make a big deal about not accepting the inheritance. Parents must have read the same book I’ve read.

Dottie57
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Re: refusing inheritance

Post by Dottie57 » Tue May 14, 2019 10:24 am

goblue100 wrote:
Tue May 14, 2019 7:36 am
dgm wrote:
Mon May 13, 2019 11:27 pm

4. my friend's sibling on the other hand has fared poorly financially, and it will make a big difference

assuming the parents cannot be convinced of modifying the split, is there something the friend can do to ensure it goes to his sibling without triggering tax issues? (for example it seems like taking it and then gifting it to the sibling may cause some unwanted tax consequences or start eating away at gift exceptions?) can he 'refuse it' or 'leave it unclaimed', causing it to pass directly to his sibling?
Is there some reason the parents don't want to leave all of it to the one who has fared poorly? Substance abuse, for example? The parents may know that too much money may be bad for the poorly performing child.

One option for the successful child is to accept the inheritance as his parents wish, and gift it back to other sibling at 15,000 a year. The gift tax exclusion for 2019 is $15,000.
Nice solution.

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dgm
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Re: refusing inheritance

Post by dgm » Tue May 14, 2019 10:31 am

thanks to all for the thoughtful responses!

re: the useage of the word "laziness" -- that is a poor choice of words on my part :oops:

re: disclaiming and lifetime exemptions and annual gift exclusions -- as suspected, i see it is more complex than i thought. thanks for the various options and for pointing out the various issues he'd need to think through

re: perspectives that the parents wishes should be honored -- that is a very good point, I never even considered his parents perspective.

i will pass this thread on.

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dm200
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Re: refusing inheritance

Post by dm200 » Tue May 14, 2019 10:42 am

dgm wrote:
Tue May 14, 2019 10:31 am
thanks to all for the thoughtful responses!
re: the useage of the word "laziness" -- that is a poor choice of words on my part :oops:
re: disclaiming and lifetime exemptions and annual gift exclusions -- as suspected, i see it is more complex than i thought. thanks for the various options and for pointing out the various issues he'd need to think through
re: perspectives that the parents wishes should be honored -- that is a very good point, I never even considered his parents perspective.

i will pass this thread on.
It may depend on all the details and on applicable state law, but my general understanding is that an heir can "disclaim" the inheritance and the net result is pretty much the same as if he/she had predeceased the one who left the money.

In such a case, I doubt there would be tax implications since no money was received.

It is not applicable to us now, but when we did our wills - we used a "disclaimer trust" so that the surviving spouse could have a choice. Planning on disclaiming the share of the inheritance seems to make a lot of sense in this described situation. You would not even need to tell anyone of your plan (in case the situation changes), BUT plan and be ready to do the disclaimer quickly. No expert here, but it seems to me disclaiming is not as complicated as some have posted. I would also investigate whether you can do a partial disclaimer - I suspect you can.

In this described case, it seems to me planning on disclaiming is much better than trying to have parents leave different amounts to different siblings.

Vanguard Fan 1367
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Re: refusing inheritance

Post by Vanguard Fan 1367 » Tue May 14, 2019 11:08 am

miamivice wrote:
Tue May 14, 2019 8:11 am
goblue100 wrote:
Tue May 14, 2019 7:36 am
dgm wrote:
Mon May 13, 2019 11:27 pm

4. my friend's sibling on the other hand has fared poorly financially, and it will make a big difference

assuming the parents cannot be convinced of modifying the split, is there something the friend can do to ensure it goes to his sibling without triggering tax issues? (for example it seems like taking it and then gifting it to the sibling may cause some unwanted tax consequences or start eating away at gift exceptions?) can he 'refuse it' or 'leave it unclaimed', causing it to pass directly to his sibling?
Is there some reason the parents don't want to leave all of it to the one who has fared poorly? Substance abuse, for example? The parents may know that too much money may be bad for the poorly performing child.

One option for the successful child is to accept the inheritance as his parents wish, and gift it back to other sibling at 15,000 a year. The gift tax exclusion for 2019 is $15,000.
The lifetime gift/estate tax exclusion is $11.2 million. If a person is married, this can get increased to $22 million per family. Few folks will have to worry about gift taxes...
Doesn't that change back to less than 11.2 million in maybe 8 years?

bsteiner
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Re: refusing inheritance

Post by bsteiner » Tue May 14, 2019 11:15 am

dm200 wrote:
Tue May 14, 2019 10:42 am
... but when we did our wills - we used a "disclaimer trust" so that the surviving spouse could have a choice. ...
Now that the Federal estate tax exclusion has increased so much (it was $675,000 as recently as 2001), and portability has been made permanent, many couples prefer to leave their estates to each other rather than to a credit shelter trust. This provides simplicity, gives the surviving spouse more control, and provides another basis step-up at the spouse's death.

However, no one knows what the future will bring. So in these cases we usually include a disclaimer trust in the Will. The disclaimer trust is essentially a credit shelter trust, except that it's up to the surviving spouse to decide whether to accept the deceased spouse's estate or to disclaim some or all of it.

The surviving spouse has less control over a disclaimer trust than a mandatory credit shelter trust. The surviving spouse can't have a power of appointment over a disclaimer trust, and can't participate in decisions to make discretionary distributions to other beneficiaries (such as the children) except for an ascertainable standard such as health, maintenance, support and education. So the disclaimer trust is mainly used as a backup, where it's expected that the spouse will accept the deceased spouse's estate, but it's there in case there's a reason not to accept some or all of it.

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TomatoTomahto
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Re: refusing inheritance

Post by TomatoTomahto » Tue May 14, 2019 11:20 am

Vanguard Fan 1367 wrote:
Tue May 14, 2019 11:08 am
miamivice wrote:
Tue May 14, 2019 8:11 am
goblue100 wrote:
Tue May 14, 2019 7:36 am
dgm wrote:
Mon May 13, 2019 11:27 pm

4. my friend's sibling on the other hand has fared poorly financially, and it will make a big difference

assuming the parents cannot be convinced of modifying the split, is there something the friend can do to ensure it goes to his sibling without triggering tax issues? (for example it seems like taking it and then gifting it to the sibling may cause some unwanted tax consequences or start eating away at gift exceptions?) can he 'refuse it' or 'leave it unclaimed', causing it to pass directly to his sibling?
Is there some reason the parents don't want to leave all of it to the one who has fared poorly? Substance abuse, for example? The parents may know that too much money may be bad for the poorly performing child.

One option for the successful child is to accept the inheritance as his parents wish, and gift it back to other sibling at 15,000 a year. The gift tax exclusion for 2019 is $15,000.
The lifetime gift/estate tax exclusion is $11.2 million. If a person is married, this can get increased to $22 million per family. Few folks will have to worry about gift taxes...
Doesn't that change back to less than 11.2 million in maybe 8 years?
Yes, and that’s the Federal gift tax exclusion. In MA, it’s $1M.
Okay, I get it; I won't be political or controversial. The Earth is flat.

LFS1234
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Re: refusing inheritance

Post by LFS1234 » Tue May 14, 2019 11:55 am

dgm wrote:
Mon May 13, 2019 11:27 pm
hi bogleheads

here is a strange question a friend asked me that i didn't know the answer to

1. my friend's parents will leave an inheritance (well under any amount that would trigger estate tax issues)
2. parents wish to split it equally amongst their two kids. partly through laziness of not wanting to think about death and partly so feelings are not hurt (they want to treat all children the same)
3. my friend has done well financially and the inheritance will not make a difference to his life and he does not desire it
4. my friend's sibling on the other hand has fared poorly financially, and it will make a big difference

assuming the parents cannot be convinced of modifying the split, is there something the friend can do to ensure it goes to his sibling without triggering tax issues? (for example it seems like taking it and then gifting it to the sibling may cause some unwanted tax consequences or start eating away at gift exceptions?) can he 'refuse it' or 'leave it unclaimed', causing it to pass directly to his sibling?
My vote is for not interfering with the parents' original 50-50 plan.

It can be disconcerting for a parent to have a child seem excessively interested in their estate planning, regardless of what the child's stated (or actual) intentions may be. Unless invited by the parents to provide feedback, it might be a good idea to keep one's thoughts to oneself unless there is a particularly compelling reason to do otherwise.

Regarding the "poor" sibling, there are two possible scenarios: either the "poor" sibling is well-adjusted and able to take care of themself (notwithstanding the relatively low income), or he/she is not.

In the former case, the "rich" sibling's seemingly generous overture may come across as condescending. This would be something to avoid. People can and do live perfectly happy and productive lives on relatively low incomes.

In the latter case, giving him/her a bunch of extra money now would be a bad idea. There already is a windfall - half the estate - when the parents pass. Why would the "poor" sibling need a double windfall if they don't have the ability to deal with money? In that case, wouldn't it be better for the "rich" sibling to just take his half, add it to his investment portfolio, and consequently to be in a better position to help the "poor" sibling in the future in case of emergencies?

It is my experience that most people who accept significant amounts of money from others without providing anything in return suffer from it psychologically. Yes, sometimes there is no choice. But being on welfare, whether private or public, isn't great for one's self-esteem, and may poison the relationship between the giver and the receiver. When the giver is a parent and the receiver is a child, having a lopsided financial relationship is natural. When both are siblings, it isn't.

afan
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Re: refusing inheritance

Post by afan » Tue May 14, 2019 1:30 pm

miamivice wrote:
Tue May 14, 2019 8:09 am
iflyjetzzz wrote:
Tue May 14, 2019 7:25 am
If your parents don't want to change their will/trust and refusing the inheritance creates negative results, you can gift your sibling $15k/yr without tax consequences. If you're married, both you and your spouse can gift $15k/yr ($30k/yr total) to your sibling.
Reference: https://www.efile.com/tax/estate-gift-tax/
The gift tax exclusion also rises over time.
You actually can gift up to $11.2 million without tax consequence.

Not exactly. You can do that without paying tax, just filling returns. However, you will use up you exemption. It does not sound like there is this much money at stake. But someone who received $11.2M in inheritance, then gave it to a sibling would then owe taxes on any gifts or bequests to his/her own children.

To avoid any tax consequences at all, they need to keep it to $15,000 per year, per donor, per recipient.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

miamivice
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Re: refusing inheritance

Post by miamivice » Tue May 14, 2019 1:33 pm

afan wrote:
Tue May 14, 2019 1:30 pm
miamivice wrote:
Tue May 14, 2019 8:09 am
iflyjetzzz wrote:
Tue May 14, 2019 7:25 am
If your parents don't want to change their will/trust and refusing the inheritance creates negative results, you can gift your sibling $15k/yr without tax consequences. If you're married, both you and your spouse can gift $15k/yr ($30k/yr total) to your sibling.
Reference: https://www.efile.com/tax/estate-gift-tax/
The gift tax exclusion also rises over time.
You actually can gift up to $11.2 million without tax consequence.

Not exactly. You can do that without paying tax, just filling returns. However, you will use up you exemption. It does not sound like there is this much money at stake. But someone who received $11.2M in inheritance, then gave it to a sibling would then owe taxes on any gifts or bequests to his/her own children.

To avoid any tax consequences at all, they need to keep it to $15,000 per year, per donor, per recipient.
Actually, my statement is exactly correct. You can gift $11.2 million without tax consequence. If you then die penniless, you and your estate will not pay a dime to the IRS for estate/gift taxes.

My point is that earlier posters were inferring that you can gift up to $15,000 a year (per donor, per recipient) without paying gift taxes. That is incorrect. Under current law, you do not pay gift taxes on a $20,000 gift from one person to another person. Rather, it triggers a reporting requirement, and your estate may end up paying taxes on your estate if your estate is over the threshold, which is so high that it affects few families today.

Of course, if you already have gifted $11.2 million, then perhaps your $20,000 gift would incur taxes today. I don't know any Bogleheads that run into that issue though and don't think that situation applies to the OP/OPs friend.

afan
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Re: refusing inheritance

Post by afan » Tue May 14, 2019 1:37 pm

miamivice wrote:
Tue May 14, 2019 9:36 am
bsteiner wrote:
Tue May 14, 2019 9:14 am
miamivice wrote:
Tue May 14, 2019 8:11 am
...
The lifetime gift/estate tax exclusion is $11.2 million. If a person is married, this can get increased to $22 million per family. Few folks will have to worry about gift taxes...
The exclusion amount is scheduled to revert to $5.7 million (indexed) in 2026, so more (but still not very many) people will have taxable estates. Fewer people are disclaiming for tax reasons than when the exclusion amount was lower. (It was $675,000 as recently as 2001.)

About 1/3 of the states have state estate taxes, with rates going up to as high as 20%. Some of them have lower exclusion amounts than the Federal.

There are other reasons besides estate taxes for disclaiming.

In many if not most states, if you have creditors (other than the IRS), and you disclaim, the disclaimed property isn't subject to your creditors.

If a beneficiary's children are the next in line beneficiaries for an IRA, a beneficiary who doesn't need the money might disclaim so his/her children can get a longer stretch.
All I was saying is that folks that believe gift taxes are due for gifts above $15,000 are a little mixed up. Nothing more.

Regarding disclaiming, if a parents wishes are that their inheritence be split equally between the children, I think it is ethically and morally wrong to disclaim your portion of the inheritence. There may be very good reasons why the parents believed their children deserved equal treatment and those reasons should be respected.

What the recipient does after receiving the inheritence is purely up the recipient however...

Bsteiner just gave a series of reasons that a beneficiary might disclaim that have nothing to do with frustrating the wishes of the decedent. Perhaps if one of bsteiner's heirs disclaimed a bequest it would not be because the expert estate planning attorney had failed to consider the implications of accepting the money. Even for bsteiner's case, he indicates that laws and circumstances change and a disclaimer is an important part of planning.

Hardly unethical or immoral. Just responsible behavior.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

retire2022
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Re: refusing inheritance

Post by retire2022 » Tue May 14, 2019 1:54 pm

Op

I’m dealing right now with this very issue with my overseas blood relatives two cousins in Canada and another in Asia.

They are older and I need to speak to my attorney who is processing my package for a will.

I think it is more pride and ignorance more than anything else, I explained to my relatives they have a right to a claim after I’m gone but they don’t want to be.

jdb
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Re: refusing inheritance

Post by jdb » Tue May 14, 2019 2:02 pm

Been there done that. When my mother prepared her Will (she died 10 years ago) she insisted assets go to to each of five children equally, even though my younger sister is in financial straits and I did not need inheritance. I explained to my mother but she insisted on equal portions so I told her would gift my portion to sister. She was OK with that. Now 10 years later still sending my sister the max allowable each year from me and my spouse, now $30K. Good luck.

Gnirk
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Re: refusing inheritance

Post by Gnirk » Tue May 14, 2019 2:48 pm

It depends upon how the will is written. I was able to disclaim a portion of my inheritance to my two children because mom's will split the inheritance between my brother and me, and if either of us were to predecease her, our inheritance would be distributed "per stirpes" to our respective children.

Otherwise, you can do as my friend did: her mother left everything to her, but asked her to give a portion of her inheritance to her deceased brother's family. She gifted the maximum amount to her SIL and each of her children until that amount was fully distributed.

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Re: refusing inheritance

Post by willthrill81 » Tue May 14, 2019 3:25 pm

miamivice wrote:
Tue May 14, 2019 9:36 am
bsteiner wrote:
Tue May 14, 2019 9:14 am
miamivice wrote:
Tue May 14, 2019 8:11 am
...
The lifetime gift/estate tax exclusion is $11.2 million. If a person is married, this can get increased to $22 million per family. Few folks will have to worry about gift taxes...
The exclusion amount is scheduled to revert to $5.7 million (indexed) in 2026, so more (but still not very many) people will have taxable estates. Fewer people are disclaiming for tax reasons than when the exclusion amount was lower. (It was $675,000 as recently as 2001.)

About 1/3 of the states have state estate taxes, with rates going up to as high as 20%. Some of them have lower exclusion amounts than the Federal.

There are other reasons besides estate taxes for disclaiming.

In many if not most states, if you have creditors (other than the IRS), and you disclaim, the disclaimed property isn't subject to your creditors.

If a beneficiary's children are the next in line beneficiaries for an IRA, a beneficiary who doesn't need the money might disclaim so his/her children can get a longer stretch.
All I was saying is that folks that believe gift taxes are due for gifts above $15,000 are a little mixed up. Nothing more.
Thank you for pointing that out. There is probably more misunderstanding of gift taxes than any other tax out there. There isn't even really a gift tax at all; your estate tax exclusion just gets reduced.

As long as the OP's friend doesn't live in a state with applicable estate taxes, this might be his best option, although refusal is obviously on the table as well. If/when the issue manifests itself, a quick discussion of the issue with a local attorney would probably be warranted.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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celia
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Re: refusing inheritance

Post by celia » Tue May 14, 2019 3:48 pm

dm200 wrote:
Tue May 14, 2019 10:42 am
It is not applicable to us now, but when we did our wills - we used a "disclaimer trust" so that the surviving spouse could have a choice. Planning on disclaiming the share of the inheritance seems to make a lot of sense in this described situation. You would not even need to tell anyone of your plan (in case the situation changes), BUT plan and be ready to do the disclaimer quickly. No expert here, but it seems to me disclaiming is not as complicated as some have posted. I would also investigate whether you can do a partial disclaimer - I suspect you can.
Sure, you can disclaim particular asset(s), a percentage of the overall estate, or even all of it. Even though you don't think you will need it, you never know what your situation will be like at the time they die. So you don't want anything fixed in stone right now. You usually have about 6 months or more after death to notify the executor/trustee of your intentions in writing. By then, you hopefully would have received a list of assets for the estate. (Sometimes there is something you DON'T want, such as a pet snake or polluted gas station that costs more to clean up than it would sell for.)

But you don't get to choose who will get the part that is disclaimed. It will go to whomever would get it had you died before the owners. This could be the other co-beneficiaries or your descendants or a completely different contingent beneficiary.

In this described case, it seems to me planning on disclaiming is much better than trying to have parents leave different amounts to different siblings.
DH and I had this discussion when revising our trust. Although our heirs are in different financial positions now, who knows how they will be after we die?

Leesbro63
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Re: refusing inheritance

Post by Leesbro63 » Tue May 14, 2019 4:20 pm

As a parent of two adult children, I would absolutely not change my will to leave everything to one child ("the poor child") even if the other child ("the rich child") specifically asked for that. What I MIGHT do is to put in a clause that would specifically state if either child disclaimed or pre-deceased me, then the other adult child would get his/her portion. All of that being said, once grandchildren come into the picture it would require more thinking. Because a grown child's disclaiming also has implications for the grandkids, who often would be the next in line for that portion. My point here is that if a "rich child" wanted to give up his/her inheritance, I might provide the tool for him/her to do it, but I would not do it for him/her. There's always the chance that family dynamics could change, perhaps after I'm mentally incapacitated. I would not want to "cut out" a child and always have that child feeling badly about it. If someone disclaims on their own, that's a different story.

JoeRetire
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Re: refusing inheritance

Post by JoeRetire » Tue May 14, 2019 4:57 pm

TomatoTomahto wrote:
Tue May 14, 2019 7:35 am
JoeRetire wrote:
Tue May 14, 2019 7:08 am
dgm wrote:
Mon May 13, 2019 11:27 pm
2. parents wish to split it equally amongst their two kids. partly through laziness of not wanting to think about death and partly so feelings are not hurt (they want to treat all children the same)
Laziness?
You feel that if the parents weren't so "lazy" that they would decide they shouldn't treat all their children the same?
To me, that's a very odd thing to believe.
I think you should reread what dgm said.
I did.

"parents wish to split it equally amongst their two kids. partly through laziness..."

JoeRetire
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Re: refusing inheritance

Post by JoeRetire » Tue May 14, 2019 4:59 pm

RickBoglehead wrote:
Tue May 14, 2019 8:09 am
JoeRetire wrote:
Tue May 14, 2019 7:08 am
dgm wrote:
Mon May 13, 2019 11:27 pm
2. parents wish to split it equally amongst their two kids. partly through laziness of not wanting to think about death and partly so feelings are not hurt (they want to treat all children the same)
Laziness?

You feel that if the parents weren't so "lazy" that they would decide they shouldn't treat all their children the same?

To me, that's a very odd thing to believe.
Not what the OP said. He said they didn't want to think about death, and called that "laziness". I'd call it avoidance.
What the OP said was "parents wish to split it equally amongst their two kids. partly through laziness..."

NotWhoYouThink
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Re: refusing inheritance

Post by NotWhoYouThink » Tue May 14, 2019 5:08 pm

Who will the executor be?

For accounts that had a TOD/POD/Beneficiary designation, the financial institutions will make sure to follow the specific directions and state law in case one of the beneficiaries decides to disclaim.

For anything passing through probate or trust, it appears to be a jungle out there. There are laws and rules, but little to no enforcement unless someone who should have been an heir sues. If the brother is the executor the problem could solve itself.

LarryAllen
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Re: refusing inheritance

Post by LarryAllen » Tue May 14, 2019 5:11 pm

He could "disclaim" it within 9 months of death. Most likely his kids would have to disclaim too. This should be done with attorney oversight to make sure all consequences are considered.

likegarden
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Re: refusing inheritance

Post by likegarden » Tue May 14, 2019 5:46 pm

You do not need to do what the parents and their will want. My father's will excluded my sister who had cost him a lot of money to go to college, not continuing with it and living with someone, but then got sick. My brother was the executor of the will, and he and I took only 1/3 each, and I established CDs for the other 1/3 from which I paid our sister every year an amount for 10 years.

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