Should You Disclaim an Inheritance?

What does it mean to “disclaim” an Inheritance?

A disclaimer is a legal way of saying: “I’m choosing not to receive this asset, and I want it to pass according to the next beneficiary according to the estate plan.”

If done correctly, the IRS treats it as if you never inherited the asset at all. This means it can move directly to the next generation without gift tax or extra estate tax layers.

You can disclaim:

• All of an inheritance
• A percentage % of an inheritance
• Or a specific asset (like an IRA or brokerage account)

Why would someone do this?

Disclaimers are not about turning down money — they’re about making sure money lands in the right place.

Here are common reasons clients use them:

1. To reduce taxes: If you’re already in a high tax bracket, inheriting a large IRA or investment account may create unnecessary taxes. Letting it pass to children in lower brackets can reduce the family’s overall tax bill.
2. To avoid growing an already large estate: If you’re financially secure, accepting more assets may simply increase future estate taxes. Disclaiming can move assets directly to the next generation.
3. To help children when they need it most: Often, adult children are buying homes, raising families, or paying for education. Assets may be more impactful in their hands today rather than later.
4. To maintain flexibility after a death: Sometimes families wait a few months before deciding who should receive what. A disclaimer can allow for thoughtful planning instead of automatic transfers.

Consider this example scenario

John, age 62, is financially secure. His father passes away and leaves him:

• $900,000 IRA
• $600,000 brokerage account

John already has more than enough for retirement and expects his own estate to be sizable. His two children, however, are in their 30s with young families and mortgages.

If John accepts everything

• IRA withdrawals would be taxed at John’s high income tax rate.
• His estate grows even larger.
• Assets would likely pass to his children later anyway.

Instead, John disclaims the IRA: Within 9 months of his father’s passing, John formally declines the IRA. His father’s will names John’s children as backup beneficiaries. (John keeps the brokerage account for flexibility and security.)

Result:

• The IRA goes directly to the children
• They withdraw funds at lower tax rates
• The IRA is not added to John’s estate
• The family saves significant taxes over time

This simple decision could save the family hundreds of thousands in taxes over time while helping the next generation sooner.

**This example is hypothetical and for informational purposes only. This does not represent the performance of any specific investment or inheritance. Individual situations can vary.

Important rules to know

To be valid, a disclaimer must:

• Be completed within 9 months of death
• Be in writing
• Be irrevocable (you can’t change your mind)
• Be done before using the asset
• Follow the estate document’s backup beneficiary structure

You cannot redirect assets wherever you want — they must pass according to the will or trust.

When should you at least consider it?

You might want to explore a disclaimer if:

• You don’t need the inherited assets
• Your children or heirs are in lower tax brackets
• Your estate is already large
• You want to reduce future estate taxes

You want flexibility before finalizing decisions.

Even if you ultimately accept everything, reviewing this option is worthwhile.

Timing matters

Many people don’t realize they have a choice. Once assets are retitled or spent, the opportunity is usually gone. That’s why we often recommend:

Pause. Review. Then decide.

You generally have up to 9 months to make a decision — but planning early is best.

How we help guide these decisions

When families experience a loss, financial decisions rarely feel urgent — yet they carry long-term impact. That’s where we step in. We help clients:

• Review tax implications
• Coordinate with estate attorneys and CPAs
• Model long-term outcomes
• Decide what supports the family best

An inheritance is a gift. A well-planned inheritance can be a legacy. Sometimes the right answer is to accept everything. Sometimes it’s to redirect thoughtfully.

If your family ever finds itself navigating these decisions, we’re here to help you think it through carefully and intentionally