SECTION 2-1105. POWER TO DISCLAIM; GENERAL REQUIREMENTS;
WHEN IRREVOCABLE.
(a) A person may disclaim, in whole or part, any interest in or power over property, including a power of appointment. A person may disclaim the interest or power even if its creator imposed a spendthrift provision or similar restriction on transfer or a restriction or limitation on the right to disclaim.
(b) Except to the extent a fiduciary’s right to disclaim is expressly restricted or limited by another statute of this state or by the instrument creating the fiduciary relationship, a fiduciary may disclaim, in whole or part, any interest in or power over property, including a power of appointment, whether acting in a personal or representative capacity. A fiduciary may disclaim the interest or power even if its creator imposed a spendthrift provision or similar restriction on transfer or a restriction or limitation on the right to disclaim or an instrument other than the instrument that created the fiduciary relationship imposed a restriction or limitation on the right
(a) A person may disclaim, in whole or part, any interest in or power over property, including a power of appointment. A person may disclaim the interest or power even if its creator imposed a spendthrift provision or similar restriction on transfer or a restriction or limitation on the right to disclaim.
(b) Except to the extent a fiduciary’s right to disclaim is expressly restricted or limited by another statute of this state or by the instrument creating the fiduciary relationship, a fiduciary may disclaim, in whole or part, any interest in or power over property, including a power of appointment, whether acting in a personal or representative capacity. A fiduciary may disclaim the interest or power even if its creator imposed a spendthrift provision or similar restriction on transfer or a restriction or limitation on the right to disclaim or an instrument other than the instrument that created the fiduciary relationship imposed a restriction or limitation on the right
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to disclaim.
(c) To be effective, a disclaimer must be in a writing or other record, declare the
disclaimer, describe the interest or power disclaimed, be signed by the person making the disclaimer, and be delivered or filed in the manner provided in Section 2-1112. In this subsection:
(1) “record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form; and
(2) “signed” means, with present intent to authenticate or adopt a record, to; (A) execute or adopt a tangible symbol; or
(B) attach to or logically associate with the record an electronic sound,
symbol, or process.
(d) A partial disclaimer may be expressed as a fraction, percentage, monetary amount,
term of years, limitation of a power, or any other interest or estate in the property.
(e) A disclaimer becomes irrevocable when it is delivered or filed pursuant to Section 2-
1112 or when it becomes effective as provided in Sections 2-1106 through 2-1111, whichever occurs later.
(f) A disclaimer made under this [part] is not a transfer, assignment, or release.
Comment
Subsections (a) and (b) give both persons (as defined in Section 2-1102(6)) and fiduciaries (as defined in Section 2-1102(4)) a broad power to disclaim both interests in and powers over property. In both instances, the ability to disclaim interests is comprehensive; it does not matter whether the disclaimed interest is vested, either in interest or in possession. For example, Father’s will creates a testamentary trust which is to pay income to his descendants and after the running of the traditional perpetuities period is to terminate and be distributed to his descendants then living by representation. If at any time there are no descendants, the trust is to terminate and be distributed to collateral relatives. At the time of Father’s death he has many descendants and the possibility of his line dying out and the collateral relatives taking under the trust is remote in the extreme. Nevertheless, under the Act the collateral relatives may disclaim
(c) To be effective, a disclaimer must be in a writing or other record, declare the
disclaimer, describe the interest or power disclaimed, be signed by the person making the disclaimer, and be delivered or filed in the manner provided in Section 2-1112. In this subsection:
(1) “record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form; and
(2) “signed” means, with present intent to authenticate or adopt a record, to; (A) execute or adopt a tangible symbol; or
(B) attach to or logically associate with the record an electronic sound,
symbol, or process.
(d) A partial disclaimer may be expressed as a fraction, percentage, monetary amount,
term of years, limitation of a power, or any other interest or estate in the property.
(e) A disclaimer becomes irrevocable when it is delivered or filed pursuant to Section 2-
1112 or when it becomes effective as provided in Sections 2-1106 through 2-1111, whichever occurs later.
(f) A disclaimer made under this [part] is not a transfer, assignment, or release.
Comment
Subsections (a) and (b) give both persons (as defined in Section 2-1102(6)) and fiduciaries (as defined in Section 2-1102(4)) a broad power to disclaim both interests in and powers over property. In both instances, the ability to disclaim interests is comprehensive; it does not matter whether the disclaimed interest is vested, either in interest or in possession. For example, Father’s will creates a testamentary trust which is to pay income to his descendants and after the running of the traditional perpetuities period is to terminate and be distributed to his descendants then living by representation. If at any time there are no descendants, the trust is to terminate and be distributed to collateral relatives. At the time of Father’s death he has many descendants and the possibility of his line dying out and the collateral relatives taking under the trust is remote in the extreme. Nevertheless, under the Act the collateral relatives may disclaim
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their contingent remainders. (In order to make a qualified disclaimer for tax purposes, however,
they must disclaim them within 9 months of Father’s death.) Every sort of power may also be
disclaimed.
Subsection (a) continues the provisions of current law by making ineffective any attempt to limit the right to disclaim which the creator of an interest or non-fiduciary power seeks to impose on a person. This provision follows from the principle behind all disclaimers-no one can be forced to accept property-and extends that principle to powers over property.
This Act also gives fiduciaries broad powers to disclaim both interests and powers. A fiduciary who may also be a beneficiary of the fiduciary arrangement may disclaim in either capacity. For example, a trustee who is also one of several beneficiaries of a trust may have the power to invade trust principal for the beneficiaries. The trustee may disclaim the power as trustee under Section 2-1111 or may disclaim as a holder of a power of appointment under Section 2-1109. Subsection (b) also gives fiduciaries the right to disclaim in spite of spendthrift or similar restrictions given, but subjects that right to a restriction applicable only to fiduciaries. As a policy matter, the creator of a trust or other arrangement creating a fiduciary relationship should be able to prevent a fiduciary accepting office under the arrangement from altering the parameters of the relationship. This reasoning also applies to fiduciary relationships created by statute such as those governing conservatorships and guardianships. Subsection (b) therefore does not override express restrictions on disclaimers contained in the instrument creating the fiduciary relationship or in other statutes of the state.
Subsection (c) sets forth the formal requirements for a disclaimer. The definitions of “record” and “signed” in this subsection are derived from the Uniform Electronic Transactions Act § 102. The definitions recognize that a disclaimer may be prepared in forms other than typewritten pages with a signature in pen. Because of the novelty of a disclaimer executed in electronic form and the ease with which the term “record” can be confused with recording of documents, the Act does not use the term “record” in isolation but refers to “writing or other record.” The delivery requirement is set forth in Section 2-1112.
Subsection (d) specifically allows a partial disclaimer of an interest in property or of a power over property, and gives the disclaimant wide latitude in describing the portion disclaimed. For example, a residuary beneficiary of an estate may disclaim a fraction or percentage of the residue or may disclaim specific property included in the residue (all the shares of X corporation or a specific number of shares). A devisee or donee may disclaim specific acreage or an undivided fraction or carve out a life estate or remainder from a larger interest in real or personal property. (It must be noted, however, that a disclaimer by a devisee or donee which seeks to “carve out” a remainder or life estate is not a “qualified disclaimer” for tax purposes, Treas. Reg. § 25.2518-3(b).)
Subsection (e) makes the disclaimer irrevocable on the later to occur of (i) delivery or filing or (ii) its becoming effective under the section governing the disclaimer of the particular power or interest. A disclaimer must be “irrevocable” in order to be a qualified disclaimer for tax purposes. Since a disclaimer under this Act becomes effective at the time significant for tax purposes, a disclaimer under this Act will always meet the irrevocability requirement for tax
Subsection (a) continues the provisions of current law by making ineffective any attempt to limit the right to disclaim which the creator of an interest or non-fiduciary power seeks to impose on a person. This provision follows from the principle behind all disclaimers-no one can be forced to accept property-and extends that principle to powers over property.
This Act also gives fiduciaries broad powers to disclaim both interests and powers. A fiduciary who may also be a beneficiary of the fiduciary arrangement may disclaim in either capacity. For example, a trustee who is also one of several beneficiaries of a trust may have the power to invade trust principal for the beneficiaries. The trustee may disclaim the power as trustee under Section 2-1111 or may disclaim as a holder of a power of appointment under Section 2-1109. Subsection (b) also gives fiduciaries the right to disclaim in spite of spendthrift or similar restrictions given, but subjects that right to a restriction applicable only to fiduciaries. As a policy matter, the creator of a trust or other arrangement creating a fiduciary relationship should be able to prevent a fiduciary accepting office under the arrangement from altering the parameters of the relationship. This reasoning also applies to fiduciary relationships created by statute such as those governing conservatorships and guardianships. Subsection (b) therefore does not override express restrictions on disclaimers contained in the instrument creating the fiduciary relationship or in other statutes of the state.
Subsection (c) sets forth the formal requirements for a disclaimer. The definitions of “record” and “signed” in this subsection are derived from the Uniform Electronic Transactions Act § 102. The definitions recognize that a disclaimer may be prepared in forms other than typewritten pages with a signature in pen. Because of the novelty of a disclaimer executed in electronic form and the ease with which the term “record” can be confused with recording of documents, the Act does not use the term “record” in isolation but refers to “writing or other record.” The delivery requirement is set forth in Section 2-1112.
Subsection (d) specifically allows a partial disclaimer of an interest in property or of a power over property, and gives the disclaimant wide latitude in describing the portion disclaimed. For example, a residuary beneficiary of an estate may disclaim a fraction or percentage of the residue or may disclaim specific property included in the residue (all the shares of X corporation or a specific number of shares). A devisee or donee may disclaim specific acreage or an undivided fraction or carve out a life estate or remainder from a larger interest in real or personal property. (It must be noted, however, that a disclaimer by a devisee or donee which seeks to “carve out” a remainder or life estate is not a “qualified disclaimer” for tax purposes, Treas. Reg. § 25.2518-3(b).)
Subsection (e) makes the disclaimer irrevocable on the later to occur of (i) delivery or filing or (ii) its becoming effective under the section governing the disclaimer of the particular power or interest. A disclaimer must be “irrevocable” in order to be a qualified disclaimer for tax purposes. Since a disclaimer under this Act becomes effective at the time significant for tax purposes, a disclaimer under this Act will always meet the irrevocability requirement for tax
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qualification. The interaction of the Act and the requirements for a tax qualified disclaimer can
be illustrated by analyzing a disclaimer of an interest in a revocable lifetime trust.
Example 1. G creates a revocable lifetime trust which will terminate on G’s death and distribute the trust property to G’s surviving descendants by representation. G’s son, S, determines that he would prefer his share of G’s estate to pass to his descendants and executes a disclaimer of his interest in the revocable trust. The disclaimer is then delivered to G (see Section 2-1112(e)(3)). The disclaimer is not irrevocable at that time, however, because it will not become effective until G’s death when the trust becomes irrevocable (see Section 2- 1106(b)(1)). Because the disclaimer will not become irrevocable until it becomes effective at G’s death, S may recall the disclaimer before G’s death and, if he does so, the disclaimer will have no effect.
Subsection (f) restates the long standing rule that a disclaimer is a true refusal to accept and not an act by which the disclaimant transfers, assigns, or releases the disclaimed interest. This subsection states the effect and meaning of the traditional “relation back” doctrine of prior Acts. It also makes it clear that the disclaimed interest passes without direction by the disclaimant, a requirement of tax qualification.
Example 1. G creates a revocable lifetime trust which will terminate on G’s death and distribute the trust property to G’s surviving descendants by representation. G’s son, S, determines that he would prefer his share of G’s estate to pass to his descendants and executes a disclaimer of his interest in the revocable trust. The disclaimer is then delivered to G (see Section 2-1112(e)(3)). The disclaimer is not irrevocable at that time, however, because it will not become effective until G’s death when the trust becomes irrevocable (see Section 2- 1106(b)(1)). Because the disclaimer will not become irrevocable until it becomes effective at G’s death, S may recall the disclaimer before G’s death and, if he does so, the disclaimer will have no effect.
Subsection (f) restates the long standing rule that a disclaimer is a true refusal to accept and not an act by which the disclaimant transfers, assigns, or releases the disclaimed interest. This subsection states the effect and meaning of the traditional “relation back” doctrine of prior Acts. It also makes it clear that the disclaimed interest passes without direction by the disclaimant, a requirement of tax qualification.
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