- Renouncing an appointment as executor is a different thing from refusing a gift, and BC law sets out the effect of renouncing as executor.
- Whether a refused gift passes under the rules for gifts that cannot take effect depends on the facts and should be confirmed with a lawyer.
- Most gifts and inheritances are not reported as income, but refusing a gift can raise creditor and tax questions worth checking first.
Some people do not want what a will leaves them. The reasons vary: the property comes with debt, it is a burden, or you would rather it went to someone else. Before you act, it helps to know what options exist and what can go wrong.
This article explains the difference between renouncing as executor and refusing a gift, what happens to gifts that cannot take effect, and the creditor and tax issues to raise with a professional. A refusal can have lasting consequences, so get advice before you sign anything.
This article covers the law of British Columbia.
Renouncing as executor is not the same as refusing a gift
A person named as executor may renounce the appointment. Unless the court orders otherwise, the estate is then administered as if they had never been appointed. That is about the role of executor, not about a gift you are to receive.
A disclaimer, in general terms, is a beneficiary's refusal to accept a gift. Whether and how a gift can be refused, and what follows, depends on the facts. It is worth confirming with a lawyer before you do anything that could be read as accepting the gift, such as using or selling the property.
Who receives a gift that cannot take effect?
BC law has rules for a gift in a will that cannot take effect for any reason, including because the beneficiary died before the will-maker. Subject to a contrary intention in the will, it goes first to any alternative beneficiary named in the will.
- If there is no alternative beneficiary and the failed beneficiary was the will-maker's sibling or descendant, the gift goes to that beneficiary's descendants, determined at the will-maker's death.
- Otherwise, it goes to the surviving residuary beneficiaries named in the will, in proportion to their interests.
Whether a gift you refuse is treated this way is a question for a lawyer to confirm, and the answer for an estate with no will may differ. Related rules also affect who takes. A person who does not survive the deceased by 5 days, or by any longer period set in the instrument, is treated as having died first. Gifts to a former spouse are generally revoked and distributed as if the spouse had died before the will-maker, subject to any contrary intention in the will.
Creditors and debts
Debts come before gifts. If the estate cannot pay all debts and gifts, WESA s. 50 sets the order in which property is reduced, starting with property specifically charged with a debt, then intestate property and the residue, then general, demonstrative and pecuniary legacies, then specific legacies. A beneficiary who is left property subject to a purchase money security interest is primarily liable for that secured debt.
If you have already received estate property, creditors may still have a claim against it. Even where a personal representative publishes a creditor notice, a creditor's right to recover estate assets from whoever received them is not affected, so a beneficiary may have to give property up to an unpaid creditor. This is one reason to hold off accepting anything until the estate's debts are clearer.
Tax points to raise with an accountant
Most gifts and inheritances are amounts that individuals do not have to report as income on their tax return. That general rule does not tell you how a refusal, or passing property along after accepting it, will be treated. Those questions depend on the facts, so check with an accountant or lawyer.
The tax duties of the estate sit with the legal representative. A representative who distributes without a CRA clearance certificate is personally liable for unpaid amounts, up to the value of the assets distributed. That is a reason representatives may be careful about the timing of distributions.
What to do next
- Do not use, sell or move any property you are thinking of refusing.
- Ask the executor for a list of the estate's assets and debts.
- Find out who would take the gift if you refuse and whether that suits you.
- Ask an accountant about tax consequences before deciding.
- Have a lawyer confirm how to refuse and put your decision in writing.
Frequently asked questions
Is renouncing an inheritance the same as renouncing as executor?
No. A person named as executor may renounce the appointment, and the estate is then administered as if they had never been appointed unless the court orders otherwise. That does not by itself address a gift left to you.
Who gets the gift if I refuse it?
That depends on the will and the facts. When a gift cannot take effect, it goes first to any alternative beneficiary named in the will, and otherwise follows the rules for descendants or residuary beneficiaries. A lawyer can confirm whether those rules apply to a refusal.
Do I pay tax on an inheritance?
Most gifts and inheritances are amounts that individuals do not have to report as income. The tax effect of refusing a gift or passing it on is a question for an accountant.
Can creditors take what I inherit?
A beneficiary who received estate property may have to give it up to an unpaid creditor. A beneficiary left property with a purchase money security interest is also primarily liable for that secured debt.
Sources
- Wills, Estates and Succession Act, SBC 2009, c. 13 (BC Laws) — bclaws.gov.bc.ca
- Canada Revenue Agency – Amounts that are not taxed — canada.ca
- Canada Revenue Agency – Clearance certificate — canada.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
This is a wills & estates question
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