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Giving up your inheritance: Assignments vs disclaimers

You've inherited part of a family member's estate. Maybe they designated you as a beneficiary in their will. Perhaps they died without a will ("intestate") and you are due a portion of the estate under California's probate laws. What if you don't want or need the inheritance? You'd prefer that someone else receive it -- or at least a portion of it? Maybe you have a sibling who has greater need for the money (or property) than you do.

You can make what's called an "assignment." You assign (transfer) all or part of your interest in the estate to someone else. This is not just an informal transfer. There are legal steps that need to be taken since the assignment contradicts what the decedent designated or what the law requires based on familial relationship.

There are also tax implications for both the person who makes the assignment (the assignor) and the person who receives it (the assignee). The assignment has to be filed with the probate court before the distribution can be made to the assignee.

Note that inheritances from a trust typically cannot be assigned to someone else. Most trusts prohibit assigning an undistributed trust inheritance. This is often done to prevent creditors from being able to claim assets in a trust.

An assignment should not be confused with a disclaimer. A disclaimer is when someone refuses an inheritance. If you want to disclaim an inheritance, you don't have any direct say in what happens to it. Legally, the assets involved are treated as though the person designated to inherit them predeceased the person whose estate is being settled. That means it could go to the next person in the line of succession, such as the children of the person who disclaims the inheritance.

There are legal restrictions on disclaiming an inheritance. There are time constraints, for example. Further, you can't have received any benefit from the inheritance (like income from a property) before you disclaim it. Unlike an assignment, an inheritance from a trust can be disclaimed.

Whether you want to make an assignment or a disclaimer, it's essential to take the appropriate legal steps. Trying to do it informally can create legal issues for the estate and everyone involved. Discuss your intentions with an estate planning attorney who can help you follow the proper legal procedures.

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