It may surprise you that sometimes a beneficiary wants to reject a gift made to them in a Will. However, a beneficiary who rejects an inheritance usually has an understandable or valid reason. They may, for example, have a financial or personal reason to reject a gift. If you wish to reject a bequest from a will, you should seek legal advice. This article explains what you should do if you are a beneficiary who does not want to accept an inheritance.

Financial Reasons

A beneficiary may not want an inheritance for financial reasons. For instance, someone with considerable wealth may prefer a more needy person to benefit from a modest inheritance. Or a beneficiary may not want to deal with the tax liability that comes with the testamentary gift.

A beneficiary may not want an inheritance because they are worried about how it will affect their eligibility for social security payments. However, they may want to rethink their decision, as Centrelink may view the rejection of a testamentary bequest as a disposal. Social security law allows a pension recipient to gift a maximum amount each financial year for a maximum of five years. Centrelink would most likely consider a rejected bequest a gift. If a beneficiary gives away assets or income over the set amount, it will count towards their income and asset test.

Personal Reasons

There may be a personal reason why a beneficiary does not want an inheritance. If a beneficiary has a painful or complicated history with the deceased, they may feel unable to take the bequest. A beneficiary considering rejecting a gift should consult with the executor and take time to make the decision.

Inconvenience

A testator may bequeath a gift that is more trouble than it is worth. For example, a testator may gift a piano, hoping that the beneficiary will enjoy learning to play. The beneficiary may not want to go to the trouble and expense of arranging for delivery of the item and may not even have room in their house for it. In that event, the beneficiary may choose to reject the bequest and avoid the associated inconvenience.

When a testator leaves a beloved pet to a beneficiary in their Will, the beneficiary may reject the gift. The beneficiary may be unwilling or unable to take ownership of a pet. To guard against this possibility, a testator should always nominate a secondary beneficiary for pets. The testator should also consider leaving a cash bequest to this beneficiary to offset the costs of pet ownership.

How to decline an inheritance

Under Australian law, a beneficiary who does not want an inheritance can reject their entitlement. This is known as a disclaimer. A person can disclaim a bequest by effective communication by any means, including by:

1. signing a deed or another written document; or
2. spoken words or conduct.

When a beneficiary disclaims a gift, the executor can then pass the gift on to the next eligible beneficiary. A beneficiary who is considering refusing a bequest must be aware that they cannot:

1. disclaim the bequest after they have accepted it;
2. disclaim the gift before the testator dies;
3. retract a disclaimer if other parties have relied on it.

To effectively disclaim a gift, the disclaimer must:

1. constitute an absolute rejection;
2. be timely; and
3. be communicated to the donor or their agent.

If the Will was executed in a foreign country, the beneficiary should check the laws dealing with rejection of bequests under that country’s law.

Deed of family arrangement

A beneficiary who does not want their inheritance can also enter into a deed of family arrangement, which alters the terms of a valid will. All interested parties, including the executor of the estate and all beneficiaries, must sign the deed of family arrangement. All parties to the deed must be adults with mental capacity who agree to the terms of the deed.

A deed of family arrangement could, for example, redistribute the assets of an estate to reflect individual family members’ financial needs of. If, for example, a deceased parent has left their estate equally to their children in their Will, the siblings may agree to redistribute the estate so that the sibling in financial need receives the estate.

A beneficiary cannot use a deed of family arrangement against public policy (for instance, to avoid a Family Provision Claim).

Here to Help

A beneficiary who does not want an inheritance may choose to decline the gift by an individual deed or by a deed of family arrangement. The beneficiary should seek legal advice to ensure that they will not be responsible for the gift, asset or debt. Contact us for advice specific to your circumstances and to draft the necessary documents.