Do you know what an inheritance disclaimer is? If you are concerned about large tax consequences in West Palm Beach listen up. You may be able to disclaim your inheritance to save on taxes and other entitlements but you have to follow the specific rules. Failure to do so could result in you paying and losing the inheritance like this poor guy out of New Jersey!
Disclaiming an Inheritance
- Why would you disclaim an inheritance?
- Who does not like free money?
- The truth is the money is not always free and there may be expensive tax consequences to consider.
- The Inheritance Tax in the United States is rather high at about 40%.
- A lot of people know that they have enough money to last their life time and that an inheritance is just going to go to their kids, so what is the point of paying the tax?
- By disclaiming the inheritance they allow the money to pass to the next in line without the tax and the next in line is often their children or other family members.
- There are also other reasons to disclaim an inheritance like changing your applicability for different subsidies and other programs.
- Check out this case out of New Jersey to learn why proper tax planning goes hand in hand with good estate planning.
New Jersey Man Pays Taxes on an Inheritance He Gave Away (To Avoid the Tax!)
- The New Jersey tax Court two days ago rules that a man will have to pay more taxes for an inheritance even though its on an inheritance he gave away!
- The man was given an inheritance out of his sister’s estate and he tried to disclaim it.
- Unfortunately he did not have an experienced Probate Law Firm to advise him on the proper procedure.
- He reluctantly accepted $90,000 from his sister’s estate and gave it away in early 2015 thinking it would no longer be considered income.
- Unfortunately this inheritance would cost him big time as it derailed his application to the Dept. of Treasury’s homestead property tax reimbursement program.
- In short he lost his qualification for a program that would give him a tax refund to help pay for his home and he had already given the money away!
- Does that sound fair to you?
- The Court stated “Plaintiff…was ill advised in his belief that he could change his 2014 income by giving away most of his inheritance in 2015… While a tax payer is free to order his financial affairs in any manner he chooses, he must accept the tax consequences of his decisions, whether those consequences were anticipated or not.”
- Does this sound fair to you?
- Talk to an experienced Palm Beach tax and estate planner today.
Want to learn more?
Check out the entire article from Law360 on the case by clicking here.