When the beneficiary of a will or trust, or a person entitled to an inheritance through the laws of intestate succession does not want to receive the inheritance, he or she can either disclaim the inheritance or assign the inheritance to another person or entity. When a disclaimer is made, the person disclaimer the inheritance is treated as though he or she had passed away before the person from whose estate he or she is inheriting.
Mr. and Mrs. Jefferson had seven adult children and a clan of grandchildren when they passed away. Their trust stated that their house was to be sold and that all the proceeds, plus all of their other assets, be divided among their seven children, the oldest of whom were twins, Kyle and Kevin. Kyle, like Kevin, was 62 years old. He had been very successful in his career and most of his investments were very profitable. Life had treated Kyle well - his children were independent and he and his wife had a net worth of over $2.5 million. He also had a pension and social security to look forward to. As he began to think about his portion of the inheritance from his parents, he realized that it would not make a marginal difference in his life; he would probably just spend it on some high-end luxury item like a fancy sports car. As he thought about it more and more, Kyle came to terms with the fact that his siblings could use his portion much more than he could. None of his siblings were doing as financially well as he was. In fact, most of the other six siblings seemed to always be struggling, barely able to save or invest. So, after talking it over with his wife, Kyle decided that he would assign his portion of the inheritance to the other beneficiaries. A similar vehicle to pass his interest to others would be to disclaim the interest. The difference between an assignment and a disclaimer is this: an assignment directs the inheritance to a specific person (or entity) whereas a disclaimer automatically shifts the inheritance to the person’s heirs. Kevin, the other twin, had traveled a much different, much bumpier road. He had changed careers several times, gotten divorced twice, and fallen into serious financial issues. Some of those issues, like unpaid alimony and IRS debts, had even become legal judgments. Kevin could really use his portion of the inheritance; however, he was concerned that once it was put in an account under his name, the funds would be garnished or confiscated to satisfy one of the judgments against him. As he pondered the possibilities and slim likelihood of ever actually seeing his inheritance money, he figured he would rather see his siblings get the money than take a chance on the IRS (or his ex-wife) getting the money. So Kevin, like Kyle, also signed a formal assignment, allowing his siblings (except Kyle) to equally share his portion of the inheritance. Kyle and Kevin provide two common examples of why beneficiaries of a trust or heirs in a probate proceeding choose to assign their inheritance to others, but there are a few other cases in which I’ve seen this done: when a beneficiary or heir strongly dislikes the person the inheritance is coming from and when a beneficiary or heir wants nothing to do with the other family members involved in the settlement process. In all of these cases, one person assigning his or her interest means that there is more for the other beneficiaries or heirs to share. If, however, an heir or beneficiary cannot be contacted or simply refuses to assign his or her interest to another, the inheritance is legally still theirs and, in most cases, that money will be held for a period of time and, if still unclaimed, will eventually go to the State of California as unclaimed property! The moral of the story here is if you don’t want your inheritance, assign it to someone else, unless of course you would rather the State of California eventually add it to her coffers! All rights reserved. © 2021 by Marlene S. Cooper. (You may obtain further information at the website www.marlenecooperlaw.com, by e-mail at MarleneCooperLaw@gmail.com, by phone at (626) 791-7530 or toll free at (866) 702-7600. The information in this article is of a general nature and not intended as legal advice. Seek the advice of an attorney before acting or relying upon any information in this article). |
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