When a beneficiary wants to reject a gift made to them in a Will, they usually have an understandable or valid reason.
Financial Reasons
A beneficiary may not want an inheritance for financial reasons.
If a beneficiary wants to reject an inheritance because they are worried about how it will affect their eligibility for social security payments, 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 up to 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.
Inconvenience
A testator may bequeath a gift that is more trouble than it is worth.
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.
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:
- disclaim the bequest after they have accepted it;
- disclaim the gift before the testator dies; or
- retract a disclaimer if other parties have relied on it.
To effectively disclaim a gift, the disclaimer must:
- constitute an absolute rejection;
- be timely; and
- 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.
A beneficiary cannot use a deed of family arrangement against public policy (for instance, to avoid a Family Provision Claim).
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.
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