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Passing On Property Interest, Insurance Payouts

Under the New Jersey Probate Code, the primary beneficiary of a family member's insurance policy is allowed to disclaim that payout, deferring it to the secondary beneficiary. In fact, this can be done with many different forms of property interest, says Ronald Garutti, a New Jersey financial planner quoted in a recent "Biz Brain" column for The Star-Ledger.

Why would you want to pass on inherited assets?

There are a lot of reasons why someone might choose to "disclaim" an insurance payout, or other property assets. In the aforementioned column by Karin Price Mueller, one reader explained that her son had passed away and left her listed as the primary beneficiary on an insurance policy, while his sister had been listed as the secondary beneficiary.

She did not have an immediate need for the money and wanted to know whether she might transfer it to the daughter.

It's a terrible situation, but a very good question. The short answer is yes, insurance payouts and property interest can be passed to the second person named on the policy by way of a disclaimer.

This is a handwritten document, given to the intended recipient, who will then deliver the disclaimer to the estate representative for the deceased. Garutti cautioned that, if you wish to file a successful disclaimer, you must refrain from making any decisions in regards to the property - that is "exercising any ownership or control over it."

Because of the complex and delicate nature of this procedure, Mueller recommends that individuals seeking to complete it consult with an estate planning attorney.

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