There's absolutely nothing to stop you from taking possession of an inheritance, then giving it away. Some people have good reasons for not accepting such gifts, from tax issues to simple generosity. If you would rather not accept an inheritance at all, however, things become a bit more complicated.
Renouncing an Inheritance
You can head off an inheritance by renouncing or disclaiming it. This involves notifying the executor or personal representative of the estate – the individual charged with guiding it through the probate process and settling it – that you don't want the gift. You must do so in writing, and it's an irrevocable decision. You can't change your mind. Depending on your reasons for declining the inheritance, some states, such as New York, may allow you to disclaim just a portion of it.
You Can't Select Your Replacement
If you decide to accept then give away your inheritance, you have the obvious right to decide who receives it. This is not the case if you renounce the gift. In most states, your disclaimer removes you from the equation just as though you had died before the individual who left you the bequest. Your inheritance goes back into his estate to be dealt with according to the terms of his will, if he left one. It would go to other beneficiaries of his choosing, not yours. If he did not leave a will, the rules for intestate succession take over. Each state has a statutory list of blood relatives who stand in line to inherit when a decedent leaves no will, typically beginning with his spouse, followed by his children, his parents, and eventually other, more distant relatives. Other relatives only inherit if those preceding them are no longer living or have waived their bequests, so if you disclaim your share of an intestate estate, your bequest goes to the next relative in line.
Issues of Timing
You must usually renounce your inheritance before you receive it – you can't accept it, then give it back again. Moreover, you must do so within a specific period of time set by state law. Often, this is nine months from the decedent's date of death, such as in New York and California. Some states, such as New York, require that you file your written renunciation with the court as well, and you must do so within the same time frame.
Notifying the IRS
You haven't officially washed your hands of your inheritance until you notify the Internal Revenue Service that you're doing so. If you don't believe estate taxes are an issue, such as because the decedent's estate isn't large enough, check with a local attorney or accountant to make sure that this is required in your particular case. Many states impose inheritance and estate taxes, so you may have to notify your state government, as well.