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Friday, February 11, 2011

If I refuse an inheritance, can I name a replacement beneficiary?

Another interesting reader question. And my answer is both yes and no, depending on what your goal is.

If you refuse ("waive") your inheritance,  you will sign a Waiver document that basically says "no thanks, I don't want it". That is the full extent of your involvement. The inheritance that you don't take will be dealt with by the executor according to the will. You will have no control over what happens to it because you will have taken yourself out of the picture.

If your goal is to get your inheritance into the hands of another person or a charity, waiving your inheritance is probably not the way to go.

There are a couple of options open to you. One is to sign an "Assignment and Direction to Pay" document and give it to the executor. This means that you are acknowledging and accepting the inheritance but asking that they write the cheque to someone other than you. Be careful that you are not asking that it be paid to someone who can't accept it, such as a minor, or a disabled person who has a trustee. In those cases you must direct that it be paid to a legal representative (i.e. a trustee) on behalf of the minor or disabled person.

The other option is to accept the inheritance and receive the money, then give some or all of it to whoever you want.

With both of these options you will have to go through the usual steps required of a beneficiary, such as signing a Release when the estate is done.

14 comments:

  1. If you refuse an estate, are you still able to handle the funeral and burial arrangements? Or is that out of your hands as well?

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    Replies
    1. Actually, the funeral and burial arrangements are already out of your hands, whether or not you refuse to accept your inheritance. The right to make funeral arrangements belongs to the executor, not the beneficiaries.

      Lynne

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  2. Hi Lynne: Thanks for all your helpful advice. If a beneficiary has requested that part of her inheritance be assigned to one of the other beneficiaries, should this be indicated in the Distribution Schedule approved by all residuary beneficiaries?

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    Replies
    1. No, because she is still claiming her right to that part of her share. She is not waiving it, which would cause it to fall back into the estate and be shared among the others. She is simply asking that you pay some of it a different way. Legally it's the same as her accepting the whole thing herself then writing her own cheque to the other beneficiary. It does not affect the rights of the other beneficiaries.

      Lynne

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    2. If the beneficiary who waives his gift has children does it automatically get passed on to his children or does it get shared amongst the other beneficiaries?

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    3. Your question was posted twice, and I just answered it on the other thread :)

      Lynne

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    4. If a beneficiary were to assign part of his inheritance and direct that it be paid to another beneficiary (who is also the executor and is not charging an executor's fee), would the amount that the beneficiary-executor so receives be considered income and liable for personal income tax?

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  3. Hi Lynn,

    Can an executor change his mind and not pay out an an interim disbursement after the beneficiaries have signed off on it?

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    Replies
    1. Yes, he probably can, but that will depend on the wording of the release that was signed. Some releases ask the beneficiary to acknowledge that funds are received, so if they've signed one like that, you'd be fraudulent to then withhold the payment.

      Lynne

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    2. Thank you very much Lynne, you have a very helpful blog here!

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    3. You're welcome. Glad you're finding it useful :)

      Lynne

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  4. Hi Lynne,

    My Mother in Law passed away and wanted me to have her home as her grand daughter and I lived with her and we shared expenses. ( I am divorced from her son). Her kids the beneficiaries knew the arrangement and are in agreement however she passed away before her will could be changed. Is this considered an "Assignment and direction to pay". She had a will and It is for the house only all other pieces are to be distributed as per the will. If not what would be the best option. Thanking you in advance!

    ReplyDelete
    Replies
    1. It's great that everyone will agree to your having the house, but a verbal agreement is of no use. The executor of the estate will have to get the written direction from each beneficiary. It should be a very clear statement that they know they are entitled to receive this inheritance but are willing to let you have it. If at all possible, get this done by a lawyer so that nobody can later claim they didn't understand what they were signing and try to get the house back.

      Lynne

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  5. Hello, Lynne.

    If a beneficiary were to assign part of his inheritance and direct that it be paid to another beneficiary (who is also the executor and is not charging an executor's fee), would the amount that the beneficiary-executor so receives be considered income and liable for personal income tax?

    ReplyDelete

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