Real Time Web Analytics

Saturday, December 22, 2018

Can I turn down my inheritance and have it paid to my daughter instead?

A reader recently asked me about having her inheritance paid to her daughter instead of receiving it herself. This is a question I hear more often than people probably expect, so I thought I'd share the discussion here.

"I am about to come into an inheritance and I would like for it to go to my daughter. She is not named in the will with my other siblings but I would like to decline my inheritance and have them give her the money instead. Am I allowed to do this? If so, how do I go about it?"

Certainly you can legally turn down an inheritance. There are two ways to do this. The first is to decline or waive the inheritance and the second is to assign the inheritance. Which of those two ways you choose depends on whether you care what the executor does with it once you turn it down. It also depends on the exact wording in the will.

If the inheritance is to be held in a trust, you may nor may not be able to control where it goes, but that is a more complex question for another day. In answering your question, I am assuming we are talking about a sum of money that is to be paid to you outright.

If you take the first route and decline your inheritance as you mentioned, it will not necessarily go to your daughter. You'll have no say in what happens to it once you opt out. Declining an inheritance simply means that you have said "I don't want it". The executors will treat your inheritance as if you had died right before the person who left you the money. This is where the wording of the will comes in; if it says your inheritance goes to your daughter if you have passed on, then she should receive it, but you will not be in a position to demand that. You will sign a release and walk away.

If you haven't seen the will, or the will doesn't say what happens if you have predeceased, or if you're not sure what the will means, then don't decline the inheritance.

You've made it clear in your question that your goal is not to walk away from the inheritance, which is what it means to decline it. You've said that you want it to go to another person. A better option in your case is the second choice, which is assigning your inheritance to someone else.

In the case of an assignment, you will act as any beneficiary would while the executor administers the estate. When it is time for the executor to write you a cheque, you will ask the executor in writing to send the cheque to your daughter instead. When I say "ask in writing" this involves signing a brief document called an Assignment in which you direct the executor to pay your share elsewhere. At some point during this process, you will sign a release.

It may seem like a small point to non-lawyers, but legally the difference between these two methods is huge. Declining your inheritance takes you out of the picture entirely and eliminates any rights you might have to object to any part of the administration of the estate. Assigning the payment of your inheritance does not eliminate those rights entirely but creates rights for the person to whom you assign your payment.

If you decide to assign your inheritance to your daughter, I strongly suggest that you get a lawyer of your own (that is, not the estate lawyer) so that you have someone who represents only you and will protect your interests. It won't be a long legal process but it's an important one.

5 comments:

  1. I had planned on accepting the inheritance and then gifting the sum to my offspring.

    Is there a reason to prefer the "Assignment" route?

    ReplyDelete
    Replies
    1. I see. So why'd you even ask if you could decline it?

      Lynne

      Delete
    2. Let me rephrase - I am NOT the Original Poster

      The comment above related to my own situation. When the time comes, I had planned on accepting the inheritance and then gifting the sum to my offspring.

      Is there a reason to prefer the "Assignment" route over "Accepting and re-gifting"?

      Delete
    3. In that case, I retract my snippy reply. Your plan to accept it and then gift it to your kids will work. There isn't much difference between the two approaches. There is no difference in tax treatment, for example. You would have more control over the transaction if you accepted it and re-gifted it. For example, you could set up the funds in a trust for your kids if that were appropriate.

      Lynne

      Delete
  2. My mother and I are listed as the beneficiaries, with the estate of my father's to be split between us. My father had an RRSP. I don't need the money. I'd like to decline the inheritance such that my mother gets the RRSP. Would doing this enable the RRSP to be transferred tax free to my mother?

    ReplyDelete

You might also like

Related Posts with Thumbnails