“You do you, boo”, we say to anyone who decides they don’t want to accept an inheritance. Truly, if you don’t want money or to be given ownership of an asset – you totally don’t have to say “yes” to receiving it.
‘Disclaimers’ and what they mean
A ‘disclaimer’ refers to the rejection of an inheritance, and they can come into effect for a range of reasons, including:
- The beneficiary wanting to avoid inheritance tax in a foreign country. For example, if a deceased family member owns property or companies overseas – say, in the United Kingdom or the U.S – the inheritance may be subject to the inheritance tax laws of those jurisdictions. In Australia though, there is no inheritance tax.
- The gift being given with a lot of strings attached, which can mean that accepting the gift can be more trouble than it's actually worth. For example, if you’re given a property with sewage and plumbing issues, or you’re given shares in a company you’d then have to have an active role in running, or the gift requires you to make payments you’d rather not have to make.
- The beneficiary wanting to avoid family conflict around them receiving that specific gift. For example, if they were estranged from the family member who has left them that gift, or if they’re a child who knows their sibling won’t be receiving a gift.
Some people just don’t like drama, so they take a step back and choose to avoid it at all costs. And who can blame them for that?!
How do I actually officially decline my inheritance?
If you’re the nominated beneficiary of a gift you don’t want to inherit, yourself and the executor of the Will can sign a legal document that disclaims your interest in the deceased estate. This then allows the executor of the Will to distribute the gift to another eligible beneficiary.
The executor does, however, need to keep a few things in mind if you tell them you don’t want your inheritance:
- The beneficiary can’t disclaim the gift before the Will-maker dies (ie. You can’t tell mum, in her capacity as executor or dad’s estate, that you don’t want your inheritance from dad, while dad is still alive and well).
- The beneficiary must decline the gift in writing.
- The beneficiary can’t disclaim the inheritance after they’ve previously accepted it. Once it’s yours, it’s yours, baby.
- The beneficiary can’t retract their disclaimer if other people (or beneficiaries) have relied on their refusal of the gift. So once you’ve disclaimed your inheritance, you can’t change your mind.
Deed of Family Arrangement
A beneficiary who is considering disclaiming their inheritance can enter into a ‘Deed of Family Arrangement’. This is a document that outlines an agreement to change the terms of a valid Will.
Everyone involved – and anyone who’s interested in these changes – must sign the deed to acknowledge that they accept these changes. It’s also important for all people (who sign the deed) to be adults with the full mental capacity to make informed decisions.
What are the circumstances that would lead to a Deed of Family Arrangement becoming relevant?
A Deed of Family Arrangement might be relevant if assets need to be redistributed to reflect the financial needs of certain family members. For example, if a parent has died and left money to some children, neglecting others who might need a little more financial assistance. In this case, the children of the deceased parent might choose to redistribute the estate so the shares feel a little more equal and appropriate for each individual’s state.
Put simply, you’re never forced to accept an inheritance if you don’t want it. But it’s important you take the correct steps to ensure that all parties know and understand what that means for them. That way you are properly providing the executor with the opportunity to redistribute your inheritance to someone else.
Start your legal Will today at willed.com.au.
Disclaimer: The content of this blog is intended to provide a general guide to the subject matter. This blog should not be relied upon as legal, financial, accounting or tax advice.