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Trusts and Estates

Ca. Trs. & Estates Quarterly 2015, Volume 21, Issue 3

A PROPOSAL TO MODIFY THE DISCLAIMER TIMING REQUIREMENTS OF INTERNAL REVENUE CODE SECTION 2518

By Trent S. Kiziah, Esq. *

I. CALIFORNIA DISCLAIMER LAW

California statutory law grants an individual the right to disclaim.1 As aptly stated by a court in 1819: "[t]he law is certainly not so absurd as to force a man to take an estate against his will."2 In California, a disclaimer must be made before acceptance of the interest and within a reasonable time after the person able to disclaim acquires knowledge of the interest.3 The period of time in which one can disclaim does not begin to run until after the individual becomes aware of the existence of the interest.4 For most interests, a disclaimer is conclusively presumed to have been filed within a reasonable time if it is filed within nine months after the death of the creator of the interest, or within nine months after the interest becomes indefeasibly vested, whichever occurs later.5 In the case of a future estate, a disclaimer is conclusively presumed to have been filed within a reasonable time if it is filed within nine months after the interest becomes an estate in possession.6

To illustrate, assume a testamentary trust provides income to decedent’s spouse, H, for his remaining life with remainder to decedent’s daughter, D, if D survives H, and if not, then the remainder passes to D’s then surviving issue, E and F. H has a present possessory interest. D either has a vested future interest subject to divestment or a contingent interest. E and F have contingent interests. If H executes a disclaimer within nine month of his spouse’s death, H will have executed a valid disclaimer under California law.7 If H is unaware of the interest, it is possible for H to execute a disclaimer after that nine-month period.8 Upon H’s death, D’s interest will become possessory if D is then living. Upon H’s demise, if D is deceased, then E and F’s interests will become possessory if they are then living. Under California law, D, E, and F will be deemed to have executed a disclaimer within a reasonable time if they disclaim within nine months of H’s demise.9 It is possible for D, E, and F to execute a disclaimer nine months after H’s demise if they are unaware of the interest.10 Under California law, if a disclaimer is deemed valid, the disclaimant is deemed to have predeceased the creator of the interest.11

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