Lamer Disclaimer

Today TaxMama hears from Dan in Richmond, VA has this story to tell,
“My mother just inherited $250,000 her brother. Her brother was married to Linda. Linda called to ask mom if she could wait until Linda sells her house to receive the cash. Linda doesn’t plan to sell her house for a few years. She has asked mom to sign a disclaimer, basically to refuse the inheritance. Then, Linda would “promise” to pay mom once she sells the house. Whenever that is. My question is, if my mom chose to give Linda more time to come up with the cash, are there any other alternatives?”


Goodness Dan, What chutzpah! That’s Yiddish for colossal nerve.

Perhaps I could understand asking your mother to wait – but to sign a disclaimer – that’s outright theft!

Under NO circumstances should your mother sign the disclaimer. The disclaimer is a legal document giving up all her rights to the money. If Linda chooses not to give your mother the money, later, she won’t have to. Let’s look at the situation, shall we?

1) What was your uncle’s intent when he left her the money? Are there enough other assets, like life insurance, or investments that Linda can sell to give Mom her cash? Linda won’t have any taxes as a result, since all the assets’ values jumped to fair market value at date of death. So, there’s no excuse.

2) If you mother is willing to wait, she can put a mortgage on the house that isn’t due or payable for, let’s say, 5 years. She will have to charge interest. The tax code demands it. Linda may pay her interest only, until the house sells. Be sure to record the mortgage, so it’s secured against the house – in case Linda decides to sell or refinance in the meantime.

3) Of course, Linda can simply get a mortgage on the house, or a second trust deed, and pay Mom off. Then, she’s free to live in the house for the rest of her life.

However, I just get the sense that if your uncle left her ‘money,’ instead of a share of the house, there was money to be left, in some form – like a life insurance policy or stock or savings. .

Naturally, if there is a way to handle all of this gracefully, without hostility, that would be best. But, if there isn’t – be sure Mom stands firm and doesn’t sign a disclaimer.

And, remember, you’ll find answers to questions about estates and other tax issues, free. Where? Where else? At TaxMama.com

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