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Estate Planning

6 Reasons to Reject a Bequest

Think twice before accepting an inheritance

3. It will trigger a government aid eligibility review. "This is something I deal with a lot," says Steve Weisman, an estate-planning and elder law attorney in Cambridge, Mass. "Someone may receive a bequest that would disqualify him for government assistance, particularly Medicaid, where recipients can't have more than $2,000 in assets. You're required to report monies you receive and would have to go off Medicaid until you spent down the money."

Veterans Affairs Aid and Attendance benefits and Supplemental Security Income can also be affected, adds Weisman.

Consult with a lawyer to determine whether disclaiming will even be successful and whom to notify if you must accept a bequest. "Medicaid has in some instances said you don't have a right to refuse bequests," says Weisman. "You must accept them and spend them down."

4. It will trigger family drama. "Maybe a vacation home has been in the family for a long time, and family members aren't going to get along when it comes to management and maintenance," explains Weisman. "I've seen people say it's not worth it."

Ask if you can disclaim the bequest and receive something of similar value from the estate instead. "The executor may have been given the authority to divide the assets," says Weisman. "Then it comes down to negotiation."

5. It will go to your creditors. If you're on the brink of bankruptcy and an inheritance won't wipe away all your debts and then some, it may essentially be transferred from your loved one to your creditors, explains Stephen Mooney, an estate-planning lawyer in Danvers, Mass.
Mooney suggests encouraging potential benefactors who are still alive to create a spendthrift trust, which would legally allow you to receive regular payments but prevent your creditors from accessing the principal.

If you're already in bankruptcy, don't be tempted to quietly reject a bequest. "If you disclaim property during bankruptcy and don't disclose your property interest, the bankruptcy trustee could go after it in spite of your disclaimer," says Mooney. "Sometimes people are tempted not to disclose, but that's not a good idea." Notify your bankruptcy attorney before you respond to any bequest, or if you filed for bankruptcy without an attorney, notify the trustee who's been assigned to handle your bankruptcy of the potential bequest.

Potential outcomes if you don't notify the trustee: You could be charged with bankruptcy fraud or your bankruptcy petition could be dismissed, leaving you at the mercy of your creditors.

6. It's the right thing to do. "Maybe your parents wanted to provide for their children equally," suggests Mooney. "But you're very successful, and your sibling is struggling. Disclaiming may get a bequest to a person for whom it makes more sense."

If you decide that a bequest won't benefit you, how do you decline it effectively? "Your rejection needs to be written, explicit and signed," says Mooney, "and it must be irrevocable and unconditional."

Next: Who inherits the summer cottage? >>

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