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Disclaiming

YOU CAN DISCLAIM assets that are left to you in a will. At that point, the money disclaimed passes to the other heirs as though you had predeceased the person who had just died. A will might even have a disclaimer clause that specifies what will happen if money is disclaimed. When disclaiming, you can’t specify who should receive your portion of the inheritance, so the wording of the will is critical.

What’s the advantage of disclaiming? Let’s say your mother leaves you $100,000. You don’t need the money and, indeed, you fear the money will be subject to federal or state estate taxes when you die and leave it to your kids. Depending on how your mother’s will is written, you may be able to disclaim the inheritance, with the money going directly to your children.

Similarly, you might disclaim part of the inheritance from your spouse, perhaps so the money ends up with your children now, while also reducing the risk that estate taxes will be due upon your death. You might do this if your spouse hadn’t taken steps to use his or her estate tax exclusion—though you could also take advantage of the portable estate tax exclusion, discussed later in this chapter.

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