To Claim or Dis-claim

Virtually every person who is designated to inherit will claim the inheritance when the time comes, whether inheriting from a living trust or from a probate. Who would refuse to claim an inheritance? No effort is required. Only patience. After the death of the owner, inheriting from a living trust is relatively quick. Inheriting from a probate is much slower. Use a San Diego trust attorney.

But there are instances where the inheritance is not desired and therefore refused. Generally the designated recipient is very wealthy and does not need the money. Accepting the money would put the person into a higher tax bracket. The person never touches the money or property and signs a form declining to accept it. He or she may not care who ends up with the inheritance.

Another instance is where the person who is designated to receive property is willing to give it up so that a specific person may inherit the property. Suppose A is the person designated to inherit, but A wants B to have the property. There may be tax problems if A takes ownership and then gives the property to B. Better if the property can bypass A with a disclaimer and go automatically to B. However, A cannot direct where the property will go. Thus A may choose not to sign the disclaimer if the property will not automatically go to B.

Suppose there are two adult children and their widowed mother has died. Her living trust divides her house equally between her son and daughter. The son has no children and he is terminally ill. He wants his sister to own the house. But if he accepts title for his half, and then deeds it to his sister, the real property tax will increase by fifty percent California property tax law (transfers between siblings are not exempt from property tax reassessment). But if the son signs a disclaimer, the house will pass by intestacy to his sister as his sole heir. There will be no property tax increase.

Here is an example of where the property may not go to the desired person. Suppose there were three adult children (the son and two daughters). If the terminally ill son disclaimed, his share of the house would pass equally to his two sisters since they are his equal heirs. He may not want that, preferring one sister over the other. The son may decide not to disclaim, but to deed the house to one sister in spite of the resulting property tax increase.

In California, a disclaimer must be in writing and signed within nine months after death, or within a reasonable time after the person able to disclaim acquires knowledge of the interest. It is filed with the trustee if the interest is from a living trust. It is also irrevocable which means the person disclaiming can’t later change his or her mind.

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