Why Saying “No” to an Inheritance Might Be the Smartest Move

Inheriting money or property often sounds like a blessing—but in some cases, it can become a financial burden. If an estate hasn’t been carefully planned, you may find yourself facing unintended consequences. As highlighted in USA Today’s article, “Got a big inheritance coming your way? You may just want to say no. Here’s why,” there are times when turning down an inheritance is the wisest course of action.

Not All Inheritances Are Worth Accepting

The value of an inheritance isn’t just about dollar signs—it’s about the strings attached. Accepting a gift without knowing the financial or legal implications can complicate your own estate or tax planning.

Here are some common scenarios where it may be better to walk away:

• Complicated Tax Consequences
  If receiving an inheritance pushes your estate over the federal or state tax exemption thresholds, it may create significant tax planning challenges for your own heirs. Before accepting, speak with your estate planning attorney about possible strategies.
• Taxable Retirement Accounts
  Inheriting assets like IRAs or 401(k)s comes with a catch—distributions from these accounts are considered taxable income. If the inheritance pushes you into a higher tax bracket, the net benefit may be much smaller than expected.
• Assets Without a Step-Up in Basis
  Some inherited assets don’t qualify for a “step-up” in cost basis, which means you could owe capital gains tax based on the original purchase price if you sell them.
• Unequal Distributions
  If your family member is leaving you more—or less—than your siblings, that imbalance can spark family conflict. Disclaiming the inheritance might help maintain family harmony, especially in emotionally sensitive situations.
• Unwanted or Burdensome Property
  Inheriting certain assets, like timeshares, isolated lots, or items with high maintenance fees and low resale value, may feel more like a liability than a gift. Consider whether the asset is truly useful or easily managed.
• Impact on Government Benefits
  If you or a loved one receives needs-based government benefits such as Medicaid or Supplemental Security Income (SSI), even a modest inheritance could jeopardize eligibility. Simply refusing the inheritance isn’t always a solution either—disclaiming is legally treated as a gift, which can also disqualify someone from these programs. A better approach may be to plan ahead using a Special Needs Trust or consult with an estate planning attorney about post-inheritance options.
• For Medicaid Recipients
  There may be ways to spend down the inheritance while remaining eligible, such as paying off debt, covering long-term care expenses, modifying a home for safety, or prepaying funeral costs through an Irrevocable Funeral Trust. These strategies should only be pursued with guidance from an experienced professional.

The Legal Process of Disclaiming an Inheritance

Saying no to an inheritance isn't as simple as declining a gift. The legal process, known as “disclaiming,” can take several months and involves preparing a formal written disclaimer. The document must be signed—and in some cases notarized—and submitted within a specific time frame, typically within six months of the original transfer.

Be aware that you cannot choose who will receive the inheritance after you disclaim it. It will automatically pass to the next beneficiary named in the will or trust. If there’s no designated alternate, the asset will go through probate and be distributed according to the state’s intestacy laws.

Don’t Make This Decision Alone

Turning down an inheritance is a serious decision that can have long-term consequences. The right estate planning attorney can help you weigh your options and avoid costly mistakes.

At The Werner Law Firm, we help clients understand the legal and financial implications of accepting or refusing an inheritance. If you’re unsure about your next steps, contact our experienced estate planning attorneys in Frisco today. They will guide you through it and answer any questions or concerns you may have.

If you have any questions, schedule a free appointment with us through our online appointment page.

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Reference: USA Today (June 27, 2025) “Got a big inheritance coming your way? You may just want to say no. Here’s why”