National Conference of Commissioners on Uniform State Laws

211 E. Ontario St., Suite 1300, Chicago, IL 60611
tel 312-915-0195, fax 312-915-0187

For Immediate Release

UNIFORM DISCLAIMER OF PROPERTY INTERESTS ACT APPROVED

August 2, 1999 - The planning for individual estates, including increases in real estate values, insurance benefits, retirement plans, living trust benefits, and benefits from others, have required the expansion of existing disclaimers laws. The Uniform Disclaimer of Property Interests Act is a powerful estate planning tool that will help cope with gaps in existing estate plans beyond the traditional settings. The act was approved by the National Conference of Commissioners on Uniform State Laws (NCCUSL) at its 108th Annual Meeting in Denver, July 23 - 30.

This new act replaces three existing acts: the Uniform Disclaimer of Transfers by Will, Intestacy, or Appointment Act, the Uniform Disclaimer of Transfers Under Nontestamentary Instruments Act, and the Uniform Disclaimer of Property Interests Act. A disclaimer, in the context of this legislation, is a refusal to accept property. Disclaimers have moved beyond the simple rejection of property by an heir or beneficiary. Disclaimers are now used to correct drafting errors, modify the terms of trusts, and make adjustments to accomplish favorable results in light of generation-skipping transfer taxes that may otherwise apply. Many of these uses are treated slightly, if at all, by the current acts. In short, the statutory framework has fallen behind practice. Hence the need for a new uniform act.

There can be numerous reasons for disclaiming property. A classic example is a mother's will which leaves her estate to her son and daughter and their children. When the mother dies, the son decides he does not need his share of his mother's estate and would like to see it pass on to his children. If he accepts his share of his mother's estate and then gives it to his children, he will incur gift tax. If he disclaims, the property passes to his children as though he had predeceased his mother.

Under the new act, a person may disclaim any interest in property, including a partial interest. A disclaimer must be in writing and signed by the disclaimant to be valid.

The Act's removal of a time limit on ability to disclaim gives ample opportunity for a disclaimant to make a considered decision. In addition, since finality is an important goal in property law, disclaimers under this Act are irrevocable once effective.

This act recognizes the existence of disclaimers as a basic aspect of property law, and provides rules for making disclaimers. Included in its provisions are explicit rules for the disclaimer of jointly held property, powers of appointment, property received through the exercise of powers of appointment, and for disclaimer of powers by all fiduciaries and of property trustees.

The disclaimer is not only a tool of tax planning, but can also be used to keep family assets intact when a beneficiary has creditors not contemplated by the deceased person. The classic example is the debtor against whom there is an outstanding judgment and who finds himself the beneficiary of an estate. By disclaiming the gift, the debtor is deemed never to have possessed it, and the creditor has no rights to it. Family assets can remain within the family in this way.

The drafting committee for the Uniform Disclaimer of Property Interests Act was chaired by Hiroshi Sakai of Honolulu, Hawaii. The drafting committee members included: Owen L. Anderson, Norman, Oklahoma; Timothy Berg, Phoenix, Arizona; William R. Breetz, Jr., Hartford, Connecticut; J. Rodney Johnson, Richmond, Virginia; Charles G. Kepler, Cody, Wyoming; David G. Nixon, Fayetteville, Arkansas; and Marilyn E. Phelan, Lubbock, Texas. William P. Lapiana of New York served as the committee's reporter.