Virgin Islands Renunciation and Disclaimer of Interest in Life Insurance Proceeds

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Description

Disclaimers are used by those who receive property as heirs or legatees in an estate, or by beneficiaries of a non-testamentary transfer of property at death; for example, the beneficiaries of a life insurance policy. A disclaimer is simply a declaration by the person entitled to property that the interest in that property is disclaimed or renounced. A disclaimer allows the disclaiming heir or beneficiary to disclaim an interest in such a fashion that the right to the property that is disclaimed is treated as if it never existed.


The Uniform Disclaimers of Property Interests Act (which has been adopted by a number of states) provides the authority to make disclaimers, what interests may be disclaimed, the time when disclaimers are effective, and the effect on the distribution of the disclaimed property interests.

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FAQ

In order to give your inheritance away before death, you need to make a will or trust that outlines your wishes. This document should designate specific beneficiaries who will receive the inheritance, as well as how it will be distributed.

If you know you intend to disclaim the inheritance, have an estate planning attorney create the disclaimer to protect yourself. If the disclaimer is valid and properly prepared, you simply won't receive the inheritance. It may or may not go to the decedent's children.

The life insurance death benefit is not intended to be part of your estate because it is payable on death ? it goes directly to the beneficiaries named in your policy when you die, avoiding the probate process. However, life insurance proceeds are considered part of an estate for tax purposes.

Giving part of your inheritance to someone else is possible, but it may or may not be the best option for you. Before doing so, make sure that you're aware of the consequences. Also, consider potential taxes associated with transferring large sums of money to avoid unexpected fees down the line.

IRS requirements for refusing an inheritance The IRS time frame is within nine months of the death of the decedent?or if the disclaiming beneficiary is a minor, after they reach age 21. If you have already accepted the inheritance or any of its benefits, the IRS would likely find the disclaimer invalid.

A beneficiary of a trust may wish to disclaim their interest in the trust for: ? personal or family reasons (acceptance of a distribution might trigger a family dispute); ? possible bankruptcy concerns; and ? relationship breakdown concerns.

The way to disclaim insurance proceeds will vary among insurance companies. However, a person must contact the life insurance company and make it aware of their desire not to receive the proceeds.

Once you disclaim an inheritance, it's permanent and you can't ask for it to be given to you. If you fail to execute the disclaimer after the nine-month period, the disclaimer is considered invalid.

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Virgin Islands Renunciation and Disclaimer of Interest in Life Insurance Proceeds