Disclaiming an inheritance

You don't say where decedent died, which could be critical since the laws of different states vary.

You don't say which state the mineral rights are located, which could change the answer to your questions.

By disclaiming the property will pass as if that person died intestate (without a will). So if that person has children it may go to the children. If that person is married it may go to the spouse.

Yes, you can disclaim only part of an inheritance.

For tax purposes a disclaimer must occur within nine months of the date of death. As a practical matter, though, since the combined gift/estate tax lifetime exemption is currently a bit over $11 million, the beneficiary can simply make a gift of his inheritance without incurring any actual tax consequences.

You will have to check state law. But normally a qualified disclaimer must state that it is a disclaimer and not merely a gift.

Yes, a qualified disclaimer is part of the tax code, for the purpose of determining when a transfer is a disclaimer and when it is a gift. If you missed the window, it will likely be considered a gift, for which filing IRS Form 709 will be required, even though no tax may actually be due. That is the reason the qualified disclaimer rule is likely the same in all states, rather than varying from state to state.

By the way, depending on the value of the mineral rights, a probate proceding may be necessary in the state where those rights are located.

The decedent was a Colorado resident, and the mineral rights are in Wyoming.

Let me make sure I understand this. If the abpve heir who disclaims the property has a spouse, then the property may go to the spouse.

This would not seem to achieve the purpose of avoiding ownership of the property for purposes of liability unless a chain of related people make disclaimers.

Stu - thanks.

Right

Thanks. So I am gathering that in this situation, there is no way it is a qualified disclaimer.

As an aside, it is difficult to valuate these mineral rights. Any of the heirs who execute the proposed lease would see payments trickling in over time. The drilling company and the executor are in agreement that it's not necessary to issue an executor's deed to the heirs. The executor will execute an "affidavit of heirship".

Yes; there are many things the executor could or should do in this situation. From the heir's perspective, the choice is either sign the lease, or do something else to back out of the situation. I hope to understand the options, if any, of that "something else".

In Wyoming, I am told the company can drill anyway even without a signed lease. They may already be doing so.

Thanks again

Steve

A quick check indicates that if the mineral rights have a market value of over $200,000, it will need to go through probate. If it's under that amount you may be able to do it without probate. Talk to a probate lawyer in Wyoming.

Disclaiming means the inheritance is treated as if you died before the decedent. So it will go to your heirs. If your spouse is considered one of your heirs, then your spouse can also disclaim.

But it appears it's too late for that in any case.

So apparently they believe the market value is under $200,000.

An oral agreement may be sufficient, particularly if the agreement is for no more than one year.

It sounds like you're pretty much all set.

If you die before the decedent, the decedent's will or trust would have to be consulted to determine where your share will go.