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By Bernard A. Krooks, Certified Elder Law Attorney

The expression “don’t look a gift horse in the mouth” usually means don’t find fault with something that you receive as a gift or don’t be ungrateful when you receive a present (even if you don’t really like it). 

Notwithstanding the foregoing, there may be times when you don’t want to accept a gift or an inheritance. Fortunately, for estate planning purposes, an individual may be able to renounce, or not accept, a gift or bequest. 

Under New York law, if you are supposed to receive property under a will, trust, or even property held jointly with someone else, you may have the right to renounce all or part of such interest in that property. The renunciation must be in writing, signed, and acknowledged by a notary public. There are also some other legal requirements such as the need to file the renunciation with the appropriate court in a timely manner. You also must state that you have not received any consideration for the renunciation from anyone who stands to benefit from your renunciation (the person who will get the property as a result of your renunciation). When you renounce the right to receive property, the property is disposed of pursuant to the terms of the will, trust, or otherwise as if you had predeceased the decedent. Once made, a renunciation is irrevocable. 

Renunciation is actually based on a very simple concept:  no one can force you to accept a gift or an inheritance. You can just say no! So, you might be asking yourself, why would I renounce property that I am entitled to receive? Well, there may be several reasons, including tax considerations, creditor concerns, or to carry out the testator’s intentions. 

Here’s how it works:  let’s say you are listed as a beneficiary under your mother’s will and your children are listed as contingent beneficiaries in the event you predecease your mother. However, you are concerned that by inheriting property from your mother you might be subjecting yourself to additional estate taxes when you pass away and want to leave the inherited property to your children. The property could potentially be subject to estate taxes twice:  once when you inherit it from your mother and once again when you leave it to your children. To avoid this result, you could renounce the property when your mother dies, and it would then pass to your children at that time. Thus, there would be only one transfer potentially subject to estate taxes instead of two. Of course, with the current federal and New York State enhanced estate tax exemption amounts, this tax benefit of renunciation will benefit only those with more significant estates. In addition, in order for the renunciation to be valid for tax purposes you must meet the appropriate requirements for a qualified disclaimer under the Internal Revenue Code. Keep in mind that one of those requirements is that you cannot direct to whom the property will go. Thus, it is critical that you understand what will happen to the property if you decide not to take it before you finalize the renunciation. Often, lawyers will draft documents specifically stating that certain property, if disclaimed, will be held in trust or pass outright to others in order to carry out the wishes of the client and to save taxes.  This might be something you wish to discuss with your estate planning attorney to ensure that your documents carry out your wishes in case one of your beneficiaries renounces all or part of your bequest. 

Renunciations can also be used to fix estate plans that do not work due to improper beneficiary designations. Recall that your estate planning documents are just one part of your overall estate plan and that your will controls only the disposition of property in your name alone at the time of your death. Thus, property held in trust for someone else or jointly with someone else will pass directly to that person on your death, regardless of what your will says. However, with a valid renunciation, the property may be able to be passed to the person who was originally intended to receive the property, thus fulfilling the testator’s wishes. 

Renunciations can be a valuable estate planning tool after someone dies, if used properly, even if you look the gift horse in the mouth!

Bernard A. Krooks, Esq., is a founding partner of Littman Krooks LLP. He was named 2021 “Lawyer of the Year” by Best Lawyers in America® for excellence in Elder Law and has been honored as one of the “Best Lawyers” in America since 2008. He was elected to the Estate Planning Hall of Fame by the National Association of Estate Planners & Councils (NAEPC). Krooks is a past Chair of the Elder Law Committee of the American College of Trust and Estate Counsel (ACTEC). Mr. Krooks may be reached at (914-684-2100) or by visiting the firm’s website at www.littmankrooks.com.