What happens if you refuse an inheritance

Doing so starts with understanding the legal process and rules involved. Disclaiming means that you give up your rights to receive the inheritance. If you choose to do so, whatever assets you were meant to receive would be passed along to the next beneficiary in line. And while it may seem strange to do so, there are some instances where it might be preferable for an heir or beneficiary to turn down an inheritance. The problem with this is that you have no control over where the asset goes.

It could pass to someone who you would prefer not to receive it. Is there a better way? If these conditions are not met the tax advantages will be lost… A variation must be in writing. This document is usually referred to as a Deed of Variation. This can be used to make post-death changes to a Will, or to re-direct a share of an estate. A Deed of Variation must be completed within two years of the death to qualify for exemption under the inheritance tax IHT and capital gains tax rules.

It must also contain a statement that the tax exemption rules are to apply. So what happens next? A beneficiary can set things right by disclaiming an inheritance and allowing it to pass to a more appropriate beneficiary.

It is also possible for a beneficiary to disclaim only a portion of an inheritance. Consider the following example: During their lifetimes, Bill and Barbara had two children, Sam and Sally.

Inheritances often give rise to gift tax liability. Beneficiaries who do not need the inheritance they are to receive often choose to disclaim the inheritance in order to pass the assets to the next generation. This allows any tax liability on the gift to be taxed in the lower tax bracket of the next generation family member.