The answer to this question is no. California law recognizes the right of an heir to an estate or a beneficiary of a trust (herein after referred to as an “heir”) to “disclaim” their interest in property to be distributed to them. A person disclaiming their interest in the inheritance, as long as the disclaimer meets the requirements of California law, will be treated as never having owned the transferred property for any state law purposes. Under California law, a disclaimer generally operates as if the heir and “predeceased” the deceased person whose estate is being distributed to the heir. Once a valid disclaimer is made, it is irrevocable and binding on the person making the disclaimer. Under the Internal Revenue Code (federal tax law), if a person makes a qualified disclaimer with respect to any interest in property of an estate, such disclaimer will act as if the interest in the property had never been transferred to the heir.
The legal requirements of a valid disclaimer seem relatively simple. Generally speaking, a disclaimer must be a written irrevocable and unqualified refusal to accept an interest in the property of the estate. The writing must describe the property which is being disclaimed or refused. Often, the disclaimer must be delivered to the executor or other appropriate persons within 9 months of the date of transfer of the property. No disclaimer can be made if the heir has accepted an interest in the transfer of the estate assets. Although these general rules seem simple, they are more complicated when applied to real life circumstances and situations of an heir.
An heir to an estate may want to use a disclaimer for many reasons. For example, they may avoid federal tax by disclaiming their interest in the estate property. Another example is where an heir to an estate owes many creditors and has many debts, a valid disclaimer in the estate assets to be inherited would prevent those creditors from ever laying claim to the assets subject to the disclaimer. But be careful as there are exceptions to every rule. For example, despite the federal tax law that recognizes disclaimers (as noted above), a federal tax lien is nonetheless enforceable against disclaimed property. Another federal law exception to the rule is that, for long-term care Medi-Cal application purposes, a person’s “assets” include any resources or income that the applicant or spouse is entitled to receive but does not receive because of actions he or she has taken or because of actions others took on his or her behalf. A disclaimer is considered such an action by the California Department of Health Care Services and may deny an application for Medi-Cal even after inheritance has been disclaimed. Regardless, disclaimers can be a good tool to use for various reasons but it is very important consult an attorney, CPA, or financial planner who has knowledge of estate planning and inheritance issues because disclaimers pose many technicalities and trap doors. Anyone considering a disclaimer should contact the Chilina Law Firm or another attorney, CPA, or financial planner, who has knowledge in estate planning and the various issues with disclaimers, for further information and nuances of the law.
Authored by Gregory J. Chilina and co-authored by Karen Chilina
Chilina Law Firm, a Professional Corporation, is a full-service estate planning, probate, trust administration, business law, and real property law firm that provides a wide-range of advising, transactional, and litigation services to its clients from its office located in Atascadero, California. The firm’s attorneys represent individuals and business entities in an assortment of transactional and litigation matters involving estate planning (including trusts, wills, powers of attorney, and medical directives), probate, trust administration, as well as general business law, contracts, corporate governance, land use, and real property. Chilina Law can be contacted by telephone at (805) 538-5038 or by email atinfo@chilinalaw.comor visit the Chilina Law Firm atwww.chilinalaw.com. Chilina Law Firm is based in Atascadero, California and serves North San Luis Obispo County communities, including Santa Margarita, Atascadero, Templeton, Paso Robles, and San Miguel.
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