When a gift is not planned correctly, the results can be a burden instead of a blessing. Before graciously accepting a gift of any size, be sure that you know what the results may be, advises the article “Got a big inheritance coming your way? You may just want to say no. Here’s why” from USA Today.
What you might be inheriting is as important as how large the inheritance is.
Some of the situations where you may want to say no, thank you, include:
If the inheritance will increase the size of your own estate and create tax planning complexities for your heirs, speak with your estate planning attorney to discuss how to address the gift.
Accepting certain assets, like IRAs and 401(k)s, could leave you with a big tax bill since distributions are treated as income. Will the inheritance move you into a higher tax bracket? Certain assets don’t qualify for a step-up basis, so the cost basis remains the same as the original owner.
Unequal inheritances easily lead to family fights. If your parents want to leave you one amount and your closest sibling another, you may want to refuse the inheritance. Even the closest family relationships are vulnerable to estate battles.
Is the property being given to you unsellable or impossible to manage? This includes timeshares, vacant lots in isolated areas, or a large item with no resale value. Be especially wary of anything with annual fees.
If someone in the family receives means-tested government benefits, such as Medicaid or Supplemental Security Income (SSI), they may risk losing their benefits if they receive an inheritance. However, just saying no isn’t enough. Refusing an inheritance is treated as a gift, which is also not permitted with means-tested benefits. An experienced estate planning attorney should be consulted to discuss the inheritance before it occurs, if possible, and, if not, after it has occurred, to take the proper steps to prevent loss of eligibility.
A Medicaid recipient may decide to use the inheritance to pay off debt, pay for long-term care, make home modifications for safety, prepay funeral and burial expenses using an Irrevocable Funeral Trust, or purchase certain items exempt from the Medicaid asset limit. You should discuss this with an estate planning attorney.
A better strategy is to ensure the parent doesn’t leave the disabled or ill recipient any money by using a Special Needs Trust or making other arrangements before the inheritance occurs.
Refusing an inheritance is a process known as “disclaiming” and can take up to six months to complete, as all necessary legal documents must be prepared and submitted. A letter of disclaimer needs to be prepared, signed, and, depending on your jurisdiction, notarized. Once you’ve disclaimed an inheritance, there’s no turning back.
One last note: you don’t get to determine who will receive the inheritance once you’ve disclaimed. The next beneficiary in line will receive the inheritance. If there’s no designated next of kin, the asset will go through probate, and the court will determine the recipient based on the state’s intestacy laws.
Speak with an experienced estate planning attorney about refusing an inheritance. There are detailed requirements that vary from state to state.
Reference: USA Today (June 27, 2025) “Got a big inheritance coming your way? You may just want to say no. Here’s why”