Looking a Gift-Horse in the Mouth: Renouncing a Bequest

gift horse, wills and trusts, renunciation, bequests, hunterdon county, union county, new jersey

Looking a Gift-Horse in the Mouth: Renouncing a Bequest

Why would anyone lucky enough to be a beneficiary under a will decide to reject the gift being left to them? The law calls this type of rejection a “disclaimer” or “renunciation”—and it’s a very important estate planning tool to consider whether you are administering or are the beneficiary of an estate.

First, let’s consider why someone would renounce a gift. For some people, it is simply a personal preference—for one reason or another, they do not want to benefit from the estate of the decedent. Far more common though, are situations where the intended beneficiary has substantial financial obligations, or is in a position where any inherited property would be at great risk.

For example, imagine your great-aunt named you as a beneficiary in her will and then she unfortunately passed away right on the same day you learned that a collection agency is hounding you for tens of thousands of dollars. In a situation like this, you might expect to be bankrupt within a couple of months. If you accept the bequest from your great-aunt, all or a portion of it may be consumed by your creditors. That’s probably not what your great-aunt would have wanted, so you can renounce the gift, have it go back to the estate and then be paid out to the other beneficiaries.

Most bequests can be renounced, assuming the following criteria are met. The renunciation must:

• Be formally made in writing to the executor or administrator

• Identify exactly what property is being disclaimed (for real estate, you must also identify the municipality, block, lot and precise interest of the beneficiary)

• Be made within a specific time period (See N.J.S.A. 3B:9-4.2)

There are some situations where renunciation is not available. The most common situation is one where the beneficiary has already acted in some way to “encumber” the bequest.

For example, if you borrowed money from someone and the loan was made based on the fact that you were expecting to receive a bequest from your great-aunt (which would be used to pay back the loan), you cannot then renounce the bequest. You are barred by statute and common law from renouncing because doing so would be inequitable to the lender.

Sometimes the beneficiaries of an estate are asked to “waive” their rights to renounce (aka disclaim) bequests. When this happens, the beneficiaries are asked to sign a formal written document that bars them from exercising the right to disclaim in the future. This is common when real property in the estate has been left to multiple beneficiaries or if the beneficiaries are attempting to obtain financing based in whole or in part on an expected inheritance.

One important final issue to consider is the tax consequences of accepting or renouncing a bequest. In some instances, the IRS will not honor a renunciation, and thus it is important to obtain the advice of a qualified estate or tax attorney prior to making any decisions about renunciation. For experienced counsel on estate planning in Hunterdon or Union Counties, New Jersey, contact Alec Borenstein, Esq., by email at alec@bmcestateplanning.com or call 908-236-6457 today.

This for That – Conditions and Restrictions in Wills


This for That – Conditions and Restrictions in Wills

For better or for worse, parents and grandparents often use monetary rewards as a means of controlling the behavior of their children and grandchildren. “If you get all A’s, I’ll give you $100.” “If you go to temple every week, I’ll put $50.00 in your bank account.” “If you don’t get any detentions this year, I’ll buy you that new car.”

Some parents and grandparents even go so far as to build these types of “carrot and stickconditions into their wills. In the past, it was common for a bequest in a will to be conditioned upon a child marrying a particular person, completing a certain degree of education or pursuing a particular profession. While these types of restrictions might seem outdated today, they are still included in many wills.

However, not all conditions and restrictions in wills are enforceable. Courts generally uphold restrictions that align with public policy, but strike down conditions that run afoul of it. For example, a bequest conditioned on the beneficiary’s successful completion of a drug rehabilitation program would likely be upheld. It is not against public policy to encourage an individual suffering from addiction to seek medical care and assistance.

If, on the other hand, a testator was to condition a bequest on an individual remaining a bachelor or bachelorette for life, then the condition would likely be struck down as against public policy. This is because it is against the public policy of the State of New Jersey to restrain people from entering marriages. Interestingly, though, under some circumstances the testator may be able to condition the bequest on the class of persons that the beneficiary marries – for example, a condition that the beneficiary only many a member of a specific religion.

When analyzing the enforceability of a restraint or condition, a Court considers the testator’s intent in creating the restraint or condition. In other words, the purpose of the condition cannot violate public policy. For example, a bequest might provide a young person with a yearly income until such time as they are married. If the testator’s purpose in making the gift was to ensure the young person’s livelihood during the early years of life, then the bequest will likely pass judicial muster; despite the condition’s practical effect of potentially discouraging the young person from marrying.

Restraints and conditions are a complex subject area. Whether you are the beneficiary of a restrained/conditioned bequest or a testator who desires to make such a bequest, you should consult a qualified estate planning attorney to fully understand these complex devices. Contact Alec Borenstein, Esq., at alec@bmcestateplanning.com or call 908-236-6457 today for assistance with estate planning matters in Union or Hunterdon Counties.

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