How Inheritance and Estate Tax Waivers Work

An inheritance or estate waiver releases an heir from the right to receive assets from an estate, and the associated obligations. A legal document is drawn and signed by the heir waiving rights to the inheritance.

Reasons to Waive an Inheritance

There are several reasons why an individual might waive rights to an inheritance. Inherited property may be liable for federal or state taxes, or both, based on the estate’s cash value. Alternatively, the heir may find it burdensome or inconvenient to maintain the property or other valuables inherited.

A person who is currently involved in a bankruptcy proceeding or a lawsuit might also seek a waiver to protect the assets from seizure by creditors.

The Language of a Waiver Form

The waiver must contain specific verbiage that is complete and binding. The heir and the deceased individual must be identified by name.

A general waiver of all benefits relating to the estate of the decedent is appropriate. However, if any specific items were listed, or if the heir has an entitlement to any specific items, a waiver should list the particulars.

The contract should state that the decision is being made freely and without coercion.

The Legal Process of Waiving Rights

States, not the federal government, make the laws related to wills and estates, and every state has its own rules.

In general, the disclaimer must be a written document that is filed with the court that has jurisdiction over the estate. The executor of the will must receive a copy of the disclaimer.

The waiver is not valid if the heir receives compensation or other benefits for agreeing to revoke their rights to certain items.

Timing and Taxes

Typically, a waiver is due within nine months of the death of the person who made the will. If the deadline passes without a waiver being filed, the heir must take possession of the assets.

Federal estate taxes, state estate taxes, and state inheritance taxes generally are due about nine months after the date of death. The taxes are calculated based on the taxable estate value, and estate and inheritance taxes must be paid before the assets are distributed to the beneficiaries.

Federal estate taxes are not due if the taxable estate is below the year’s minimum threshold. For 2024, estates valued at less than $13.61 million were not subject to federal taxes. Eighteen states and the District of Columbia impose estate or inheritance taxes.

Legal Repercussions of Waiving Rights

When a waiver is filed, the executor of the estate has responsibility for the distribution of assets. The person filing the waiver may not designate another individual as the new heir.

If the will does not contain instructions that cover a possible waiver of inheritance, probate law may dictate where it goes. In some instances, the executor may have some discretion in who receives the disclaimed inheritance. However, they are bounded to comply with the wishes of the will or trust as best as possible. If there is no will, the unwanted inheritance will pass to the next of kin. The transfer must be approved by the probate court.

State Requirements

State laws determine how a waiver works. Some states restrict their uses or require specific verbiage in the waiver. Consult a lawyer and your state’s laws to learn how to properly disclaim an inheritance in your state, if it’s something you desire to do.