Around the Bar

AROUND THE BAR By: Stacie D. Miller

Arnett, Draper & Hagood

BUT I DON’T WANT IT...

If you practice in probate, how often do you get a phone call from an heir saying, “I don’t want my inheritance?” I usually get calls asking “When I am I getting my inheritance?” or “Why is it taking so long?” and “I want more,” but seldom (never) do I get calls from an heir asking how to refuse even part of their inheritance. Until recently…then within a 24-hour period, a colleague called asking if I was familiar with the revised statute on disclaimers and an heir called stating she wanted to refuse her interest in part of her inheritance. Time to research and learn something new.

A disclaimer is the act of refusing to accept an interest in property or power over property. In 2019, the Tennessee Disclaimer of Property Interests Act was enacted. Tenn. Code Ann. §31-7-101 et seq.

Power to Disclaim.

A person may disclaim in whole or part any interest in property or power over property, including a power of appointment, even when the person creating the interest or power imposed a spendthrift provision or similar restrictions. A person may not disclaim when it is expressly restricted or limited by law or by the instrument creating the fiduciary relationship. A disclaimer must be in writing; declare the disclaimer and its extent; describe the interest or power disclaimed; and be signed by the person making the disclaimer or at their express direction with competent witnesses. A partial disclaimer can be in the form of a fraction, percentage, monetary amount, term of years, limitation of power or any other interest or estate property. 1

Disclaimer of Interests In Property

Except for property held in trust or jointly owned with right of survivorship, a disclaimer takes effect at the time the instrument creating the interest becomes irrevocable or if the interest is pursuant to an intestate succession, at the time of the intestate’s death. The disclaimed property then passes according to the alternate provisions in the instrument creating the interest, or as set forth by statute and the laws of intestate succession apply.2

When one holder of jointly held property with right of survivorship dies, the survivor may disclaim, in whole or part that portion of the interest in the property to which he or she is entitled by virtue of the other’s death. Such a disclaimer is effective upon the death of the holder of jointly held property to whose death the disclaimer relates. 3

Disclaimer of Power

A more common request is one to disclaim power, such as when an individual appointed as personal representative over a deceased person’s estate declines to serve.

A fiduciary can disclaim a power held in a fiduciary capacity either before or after it has been exercised. If the power has not been exercised, the disclaimer is effective at the time the instrument creating the power becomes irrevocable. If the power has been exercised, the disclaimer takes effect immediately following the last time the power was exercised. Such a disclaimer can be binding upon another fiduciary if the disclaimer so provides, and the disclaiming fiduciary has the authority to bind the estate, trust or other person for whom they are acting.4

Disclaimers of power not held in a fiduciary capacity are treated in a similar manner. Such a power can be disclaimed before or after it has been exercised. If it is disclaimed before it is exercised, the disclaimer is effective as of the time the instrument creating the power became irrevocable. If the power has been exercised, the disclaimer takes effect immediately following the last time it was exercised.5

Delivery or Filing of Disclaimer

A disclaimer may be delivered by personal delivery, first-class mail, or any other method likely to result in receipt by the statutorily designated recipient. For an interest created by an intestate succession or by will, the disclaimer must be delivered to the personal representative or if no personal representative is serving, it must be filed with the court. There are similar provisions for delivery of disclaimers for both testamentary trusts and inter vivos trusts. Additionally, in some cases the disclaimer of an interest in personal property must be delivered to the person who is obligated to distribute the personal property. Further, the disclaimer of an interest in real property may require recordation in the office of the county register’s office where the property is located. Special provisions apply for who is entitled to notice when dealing with a disclaimer of power or jointly held property.6

Barring or Limiting Disclaimer

Not all interest in property or powers can be disclaimed. A disclaimer is barred when there is a written waiver of the right to disclaim. A disclaimer of an interest in property is barred if the disclaimant accepts the interest before the disclaimer becomes effective or if they voluntarily assign, convey, encumber, pledge or transfer the interest before the disclaimer becomes effective. A disclaimer is also barred where a judicial sale of the interest is sought before the disclaimer becomes effective. A disclaimer is barred or limited where provided by other law.7

Conclusion

The revised law on disclaimer has kept some familiar language but added some significant details. Next time someone says they want to decline or disclaim an interest or power, I encourage you to take a few minutes to review the code.

1 Tenn. Code Ann. §31-7-105. 2 Tenn. Code Ann. §31-7-106. 3 Tenn. Code Ann. §31-7-107. 4 Tenn. Code Ann. §31-7-111. 5 Tenn. Code Ann. §31-7-109. 6 Tenn. Code Ann. §31-7-112. 7 Tenn. Code Ann. §31-7-113.