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Disclaiming a New York Inheritance: Denied

Posted on: March 14th, 2015
new york inheritance disclaimerIndividuals might disclaim an inheritance for a number of a reasons. An inheritance might: involve property with significant maintenance requirements; impact an elderly heir’s eligibility for public benefits; be better suited for another family member; be subject to creditor claims; or have tax consequences that outweigh the benefits of accepting the assets. A New York court recently denied an attempt to disclaim in a case involving the latter, one that involved a beneficiary who has not yet reached the age of majority.

Refusing an inheritance in New York requires a specific process; this process differs from state to state. Not only will the disclaimer need to comply with state law, but it will need to satisfy federal law requirements as well. A few items that are universally important regardless of where the estate administration takes place: The potential heir must notify the executor of the disclaimed interest in a timely manner (within 9 months from the date of death); the potential heir cannot have benefited from the asset they are attempting to disclaim; and the disclaimer must be presented in writing. The individual disclaiming the inheritance has no power to decide who or how the assets should then be distributed; this is governed under state law.

Almost a year ago, New York resident Sharon Lindsay died leaving an estate valued at more than $6 million. The estate was left to Lindsay’s husband and two children. In order to minimize estate tax consequences, the siblings chose to disclaim their shares and allow the assets to pass to their father instead, who enjoyed a marital exemption. However, one of the siblings has an infant daughter.

According to New York State law, if the sibling disclaimed her share, the assets would then pass to her next of kin—not to the father as the siblings desired. To move forward, the sibling chose to disclaim her infant’s interest as well.

Brooklyn Surrogate Judge Diana Johnson rejected the petition. According to the Brooklyn Eagle, Johnson explained that “if [the estate] were to go to the infant's grandparent, there is no guarantee that this infant would ever receive any benefit.” The best interests of the infant needed to be taken into consideration, according to the court.

To avoid potential disclaimer issues, one should prepare and maintain a comprehensive estate plan. New York’s estate tax “cliff” currently imposes tax on estates valued at 105% or more of $2,062,500, the exemption amount until March 31, 2015. (New York’s estate tax exemption will increase annually to $5.25 million in 2017). When planning your estate in New York, review the chart below and plan accordingly with an estate attorney:

Date of Death New York Exemption
4/1/14–3/31/15 $2,062,500
4/1/15–3/31/16 $3,125,000
4/1/16–3/31/17 $4,187,500
4/1/17–3/31/18 $5,250,000
On or after 1/1/19 Matches federal exemption.


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