disclaimers under the new texas udpia - res ipsa...disclaimers under the new texas uniform...

DisclaimersundertheNewTexasUniformDisclaimerofProperty

InterestsAct

GlennM.KarischTheKarischLawFirm,PLLC

301CongressAvenue,Suite1910Austin,Texas78701(512)328‐6346

www.texasprobate.com

ProfessorThomasM.Featherston,Jr.MillsCoxChairofLawBaylorLawSchool

JuliaE.Jonas

Osborne,Helman,Knebel&Scott,LLP301CongressAvenue,Suite1910

Austin,Texas78701(512)542‐2000

www.ohkslaw.com

Revised August 26, 2015

Glenn M. Karisch The Karisch Law Firm, PLLC

301 Congress Avenue, Suite 1910 Austin, Texas 78701

Phone: (512) 328-6346 Fax: (512) 597-4062 [email protected]

Education The University of Texas School of Law, Austin, Texas Juris Doctor with Honors, 1980 Order of the Coif The University of Texas at Austin, Austin, Texas Bachelor of Journalism with Highest Honors, 1977 Professional Experience The Karisch Law Firm, PLLC, 2008 - Barnes & Karisch, P. C., Austin, Texas, 1998 - 2007 Ikard & Golden, P. C., Austin, Texas, 1992 - 1998 Hoffman & Stephens, P. C., Austin, Texas, 1991-1992 The Texas Methodist Foundation, Austin, Texas, Vice President and General Counsel, 1989-1991 Coats, Yale, Holm & Lee, P. C., Houston, Texas, 1980-1989 Professional Activities Board Certified, Estate Planning and Probate Law, Texas Board of Legal Specialization Fellow, American College of Trust and Estate Counsel Real Estate, Probate and Trust Law Section, State Bar of Texas Chair, 2007-2008 Council Member, 1999-2003 Chair, Probate Legislation Committee, 2003 - 2008 Chair, Trust Code Committee, 2000-2004 Chair, Subcommittee Studying Articles 8 and 9 of the Uniform Trust Code, 2000 - 2002 Chair, Subcommittee Studying Uniform Principal and Income Act, 2000 - 2002 Chair, Guardianship Law Committee, 1999-2000 Chair, Estate Planning and Probate Section, Austin Bar Association, 1996-97 Partial List of Legal Articles and Papers Author and Editor, Texas Probate Web Site [texasprobate.com] and the Texas Probate Mailing List [[email protected]] (1995-Present). “UPIA Handbook,” The Texas Probate Web Site [texasprobate.com] (2003 - 4). “Multi-Party Accounts and Other Non-Probate Assets in Texas,” University of Texas School of Law Intermediate Estate Planning, Guardianship and Elder Law Conference (2000), updated on texasprobate.com. “Modifying and Terminating Irrevocable Trusts,” State Bar of Texas Advanced Estate Planning and Probate Law Course (1999), updated on The Texas Probate Web Site [texasprobate.com] “Protecting the Surviving Spouse,” State Bar of Texas Advanced Estate Planning and Probate Law Course (2006), updated on The Texas Probate Web Site [texasprobate.com]. “Court-Created Trusts in Texas,” State Bar of Texas Advanced Drafting: Estate Planning and Probate Law Course (1995), updated on The Texas Probate Web Site [texasprobate.com]. “Dealing with Dysfunctional Clients,” State Bar of Texas Advanced Estate Planning and Probate Course (2010). “Bypass Trust Basics,” University of Texas CLE Estate Planning, Guardianship and Elder Law (2010). Legislative Updates, 1997 – 2015, The Texas Probate Web Site [texasprobate.com].

Thomas M. Featherston, Jr. Mills Cox Professor of Law

Baylor Law School 1114 S. University Parks Dr.

Waco, Texas 76798-7288 254-710-4391

[email protected]

Education ‒ B.B.A. (joint B.B.A./J.D. program) Baylor University, Waco, Texas, 1971 ‒ J.D. (with highest honors), Baylor University, Waco, Texas 1972

Professional Activities

‒ ‒ ‒

Faculty member, Baylor Law School (1982-present) Selected, An Outstanding University Professor - Baylor University (2000) Selected, Distinguished Texas Probate and Trust Attorney, Real Estate, Probate & Trust

Law Section, State Bar of Texas (2009)‒ Board Certified, Estate Planning and Probate Law, Texas Board of Legal Specialization (since 1979) ‒ Academic Fellow, American College of Trust and Estate Counsel (since 1991) ‒ Trusts & Estates Articles Editor, Probate & Property, an ABA publication (since 2000)‒ Member, Faculty of the ABA’s Skills Training for Estate Planners, New York, New York ሺsince 2009ሻ ‒ Co-author of West’s Texas Practice Guide–Probate (since 2000)‒ Author of Questions and Answers: Wills, Trusts & Estates, a LexisNexis publication

(3rd ed., 2014) ‒ Co-author of Questions and Answers: Wills, Trusts & Estates, a LexisNexis publication (2nd ed., 2008) ‒ Author of Questions and Answers: Wills, Trusts & Estates, a LexisNexis publication (2003) ‒ Co-author of Bridging the Gap–Drafting for Tax and Administration Issues, an ABA publication (2000) ‒ Former Chair and Council Member, Real Estate, Probate and Trust Law Section, State Bar of Texas ‒ Former Council Member, Real Estate, Probate and Trust Law Section, American Bar Association ‒ Lifetime Fellow, American Bar Foundation‒ Visiting Professor, Universitat Erlangen - Nurnberg, Erlangen, Germany (Summer 1998)‒ Private practice in the estate planning and probate area in Houston, Texas (1973-1982)‒ Frequent author and lecturer in areas of estate planning, probate and marital property

11/2014

Julia E. Jonas Osborne, Helman, Knebel & Scott, LLP

301 Congress Avenue, Suite 1910 Austin, Texas 78701

Phone: (512) 542-2000 Fax: (512) 542-2011 [email protected]

Julia Jonas is an associate of Osborne, Helman, Knebel & Scott, LLP, and practices primarily in the area of estate planning, including representation regarding complex testamentary dispositions, dynasty trusts, family limited partnerships, limited liability companies, and related wealth planning strategies. She advises clients with respect to their philanthropic objectives, including the creation of split-interest charitable trusts and private foundations. Julia also represents fiduciaries and beneficiaries in connection with probate procedures, trust and estate administration, guardianship accountings and administration, and trust terminations and modifications. In connection with this work, Julia assists the firm’s litigators in controversies involving trust, estate, and guardianship matters. Julia also assists in the representation of the firm’s international clients, advising on international tax and compliance obligations, asset protection, and fiduciary litigation.

Professional Memberships and Honors Member, State Bar of Texas Member, American Bar Association Member, Austin Bar Association Member, Austin Young Lawyers Association Member, The College of the State Bar of Texas Member, Estate Planning Council of Central Texas Member, International Bar Association Scholarship Recipient, 2014 Individual Tax and Private Client Committee Scholarship Award, International Bar Association Annual Conference (Tokyo, Japan)

Education University of Texas Law School (J.D., with honors, 2011) Carleton College (B.A., English, 2007)

Publications and Presentations Co-Author, “Problems with the Texas Disclaimer Statutes and How to Deal with Them,” 38th Annual Estate Planning & Probate Course, State Bar of Texas, San Antonio, Texas (2014) Co-Author, “Foreign Account Tax Compliance Act and Other Foreign Reporting,” 31st Annual Advanced Tax Law, State Bar of Texas, Houston, Texas (2013) Co-Author, “Offshore Account Reporting Requirements,” 59th Annual Texas CPA Tax Institute, Texas Society of Certified Public Accountants, Dallas, Texas (2012)

Contents

1. BackgroundoftheTexasdisclaimerstatutesandproblemsunderpriorlaw...............................................................2

A. HistoryofTexasDisclaimerStatutes..........................................................................................................................................21. Enactment–1971..........................................................................................................................................................................22. Amendments.....................................................................................................................................................................................2a. 1977amendment:coordinationwithfederaltaxlaw............................................................................................2b. 1993amendment:relation‐backdoctrineandotherchanges............................................................................4c. Otheramendments..................................................................................................................................................................4

3. EstatesCodeChapter122..........................................................................................................................................................5

B. Equitablerescissionofdisclaimers..............................................................................................................................................5

C. ProblemswithChapter122.............................................................................................................................................................71. Mustmeetallrequirementstobeeffective........................................................................................................................72. TheTexasdeadlinesdidn’tmatchupwiththetaxdeadlines....................................................................................83. Disclaimerbyatrustee................................................................................................................................................................84. Disclaimerofsurvivorshipproperty......................................................................................................................................9

2. ThenewTexasUniformDisclaimerofPropertyInterestsAct.............................................................................................10

A. SummaryofkeyfeaturesoftheTexasDisclaimerAct......................................................................................................101. Thereisjustonestatute............................................................................................................................................................102. Thereisnostatelawtimelimitfordisclaimers.............................................................................................................103. Therearelessrestrictivetechnicalrequirements.........................................................................................................114. Differenttypesofpropertyarespecificallyaddressed................................................................................................115. Fiduciarydisclaimersareexpandedwithclearrulesfordifferenttypesoffiduciaries...............................11

B. AguidetousingtheTexasDisclaimerAct..............................................................................................................................111. Effectivedateissues....................................................................................................................................................................122. Illustratingthebasics:Anon‐fiduciarydisclaimerinadecedent’sestate........................................................12a. Thereisnodeadline,solongasthedisclaimerismadebeforeacceptingtheproperty........................12b. Whatmustthedisclaimerinstrumentcontain?......................................................................................................13c. Whataboutdeliveringorfilingit?.................................................................................................................................13d. Towhomdoesthedisclaimedpropertygo?...............................................................................................................14e. Whenisthedisclaimereffective?....................................................................................................................................14

3. Disclaimersofothertypesofpropertyandinothersituations...............................................................................15a. Survivorshipproperty..........................................................................................................................................................15b. Beneficiarydesignationproperty...................................................................................................................................15c. Trustproperty.........................................................................................................................................................................15d. Powersofappointment.......................................................................................................................................................16e. Disclaimerofapowerbyagent.......................................................................................................................................16

4. Apotentialtrapforthoseusedtousingtheformerlaw:Deliverytomultipleparties...............................165. Fiduciarydisclaimers.................................................................................................................................................................17a. Disclaimerofpowersbyapersondesignatedtoserveasorservingasafiduciary................................18b. Fiduciarydutiesversuscourtapproval.......................................................................................................................18c. Equitableremediesvoidingthedisclaimerarenotavailable...........................................................................19d. Disclaimersrequiringcourtapproval..........................................................................................................................20e. Disclaimersnotrequiringcourtapproval..................................................................................................................21f. Aspecialcase:disclaimerbynaturalguardian......................................................................................................21g. Trusteedisclaimers...............................................................................................................................................................22

6. OtherTexasDisclaimerActissues........................................................................................................................................25a. Effectofspendthriftprovisionandprovisionsininstrumentgrantingorlimitingdisclaimer power...........................................................................................................................................................................................25b. Taxsavingscatch‐all............................................................................................................................................................26c. Dofiduciarieshaveliabilityfordistributingpropertybeforeadisclaimer?..............................................27

d. Arenon‐statutorydisclaimerspermitted?.................................................................................................................28

3. Federalissues.............................................................................................................................................................................................29

A. Federaltaxliens.................................................................................................................................................................................29

B. Disclaimant’sbankruptcy..............................................................................................................................................................30

C. ERISAbeneficiaries...........................................................................................................................................................................30

D. Medicaideligibility............................................................................................................................................................................30

4. Draftingopportunities...........................................................................................................................................................................31

A. Anticipatingpossibledisclaimerswhendraftingestateplanningdocuments.......................................................311. Disclaimerintothecreditsheltertrust..............................................................................................................................312. Disclaimeroutofthecreditsheltertrust..........................................................................................................................323. Goingcrazywithspecificprovisions:Directingdisclaimersintoandoutofvarioustrusts.....................324. Draftingtopermitaspecialtrusteetomakedisclaimers.........................................................................................335. Exculpatingthetrusteeformakingdisclaimers............................................................................................................346. Prohibitingtrusteedisclaimers.............................................................................................................................................347. Usingadisclaimertomakeadefined‐valuegiftortodeferthedecisiontopaygifttaxorestatetax.35

B. DraftingdisclaimersundertheTexasDisclaimerAct.......................................................................................................36

C. Usingthenoticeprovisionsfortrusteedisclaimers............................................................................................................361. Whoisentitledtonotice?.........................................................................................................................................................36a. Currentbeneficiary...............................................................................................................................................................37b. Presumptiveremainderbeneficiary..............................................................................................................................37c. Noticetominororincapacitatedbeneficiaries........................................................................................................38d. Noticetotheattorneygeneral.........................................................................................................................................38e. Waiverandotherexceptionstothenoticerequirement.....................................................................................38f. Examples....................................................................................................................................................................................39

2. Whatmustthenoticecontain?..............................................................................................................................................413. Whenmaythetrusteedisclaim?...........................................................................................................................................424. Whatshouldabeneficiarydoifheorshedoesnotwantthetrusteetodisclaim?.........................................43

D. Seekingcourtapprovaloffiduciarydisclaimers.................................................................................................................431. Necessaryparties.........................................................................................................................................................................432. Forum................................................................................................................................................................................................443. Judgment..........................................................................................................................................................................................45

5. Conclusion...................................................................................................................................................................................................45

Appendix1–TheTexasUniformDisclaimerofPropertyInterestsAct(PropertyCodeChapter240)–TextandCommentary...........................................................................................................................................................................................................46

Appendix2‐DisclaimerForms......................................................................................................................................................................64

DisclaimersundertheNewTexasUniformDisclaimerofPropertyInterestsAct1

Likemanystates,Texasenactedadisclaimerstatuteinthe1970sastax‐motivateddisclaimersbecamemoreprevalent.Overtheyears,thedisclaimerstatuteexpandedandspawnedatrust‐relatedoffspring.Becauseofthispiecemealdevelopment,theexistingTexasdisclaimerstatutes(Chapter122oftheEstatesCodeandSection112.010oftheTrustCode)grewquirkyanddifficulttofollowandcreatedtrapsfortheuser.DisclaimerswerepossibleunderfederaltaxlawthatwerenotexpresslyallowedbyTexaslaw.

In2015,the84thTexasLegislatureenactedtheTexasUniformDisclosureofPropertyInterestsAct,2whichbecameeffectiveSeptember1,2015.ThispaperbrieflydiscussesthebackgroundofTexas’sdisclaimerstatutesandsomeoftheproblemsundertheformerstatutes.ItthendiscussesthenewTexasdisclaimerlawandoffersaguidetousingit.Finally,itdiscussesissuesrelatedtofederallawwhichmayaffectTexasdisclaimers.Appendix1isatablewiththestatutorylanguageandasection‐by‐sectioncommentary.FormsimplementingthenewTexasdisclaimerlawareattachedasAppendix2andareavailableinWordformatattexasprobate.com.

TomFeatherstonwroteselectedportionsofthispaper,allofwhicharecogentandinsightful.GlennKarischandJuliaJonaswrotetheother,messierparts.

TheauthorsacknowledgethehelpprovidedbyGerryBeyeroftheTexasTechLawSchool,StanleyJohansonandMarkAscheroftheUniversityofTexasSchoolofLaw,WilliamLaPianaoftheNewYorkLawSchoolandAdamHirschoftheUniversityofSanDiegoSchoolofLaw.TheTrustCodeCommitteeoftheRealEstate,ProbateandTrustLawSectionoftheStateBarofTexas(“REPTL”)isresponsibleforthenewstatute,andtheauthorsacknowledgeitseffortsandthoseofitsco‐chairs,MarjorieStephensofDallasandJeffMyersofFortWorth,aswellasBillPargaman(REPTLChair‐Elect)andCraigHopper(REPTLLegislativeWrangler)ofAustin.

1 LicensedforcommercialusetotheStateBarofTexasandtheUniversityofTexasSchoolofLaw;

otherwisesubjecttoCreativeCommonslicenseCCBY‐NC‐ND3.0. 2HB2428.

DisclaimersundertheNewTexasUniformDisclaimerofPropertyInterestsAct Page2

1. BackgroundoftheTexasdisclaimerstatutesandproblemsunderpriorlaw

Enactedin1971andamendedbyninelegislatures,TexasProbateCodeSection37A(“Section37A”)hadbeenmodifiedinapiecemealmannerforoverthreedecades.TheresultiscurrentlycodifiedinTexasEstatesCodeChapter122,subchaptersA‐D(“Chapter122”).Asdiscussedbelow,Chapter122couldbedifficulttoutilizeforseveralreasons,includingthefactthattheeffectivenessofadisclaimerdependsoncompliancewithtechnicalities,andthatsomeoftheprovisionsarenotconsistentwithfederallawconcerningqualifieddisclaimersfortaxpurposes.

A. HistoryofTexasDisclaimerStatutes

ManyoftheidiosyncrasiesofChapter122canbeexplainedthroughareviewofthelegislativehistoryofSection37A.Additionally,thelegislativehistoryprovidesinsightabouttheadministrativechallengesthataroseunderdifferentconfigurationsofthedisclaimerstatute.

1. Enactment–1971

Section37Awasenactedin1971asHB728.ThestatedpurposeofHB728was“toclarifythedisclaimerlawinTexas”becauseexistingdisclaimerlawwas“vagueandunclear.”3Asoriginallyenacted,Section37Aconsistedofsubsections(a)through(f).Fiduciarydisclaimerswerenotaddressedundertheoriginalstatute.

Theintroductorylanguageintheoriginalstatuteincludedthefollowingstatement:“Failuretocomplywiththeprovisionshereofshallrendersuchdisclaimerineffectiveexceptasanassignmentofsuchpropertytothosewhowouldhavereceivedsamehadthepersonattemptingthedisclaimerdiedpriortothedecedent.”4Accordingly,tobeeffective,adisclaimerhadtoadheretothetechnicalrequirementsofeachofthesixexistingsubsections,asapplicable.

2. Amendments

a. 1977amendment:coordinationwithfederaltaxlaw

Section37Awassignificantlyrevisedin1977inresponsetotheTaxReformActof1976.5ThepreviousversionofSection37Ahadpermitteddisclaimersonlywithinsixmonthsafteratransfer,butthe1977amendmentextendedthedeadlinetoninemonthstoconformwithfederaltaxlaw.6Additionally,undertheoriginallanguage,adisclaimercouldberevokedwithjudicialapprovalwithinninemonthsafterthedate

3BillAnalysis,CommitteeonJudiciary,H.B.728,62ndLeg.,R.S.4Tex.Prob.Code§37A(1971)(thirdsentence).5BillAnalysis,CommitteeonJudiciary,S.B.791,75thLeg.,R.S.6Tex.Prob.Code§37A(a)(1977).


ofthetransfer.7The1977amendmenteliminatedthejudicialrevocationproceduretobeconsistentwiththerequirementundertheInternalRevenueCodethataqualifieddisclaimerbeirrevocable.8

The1977amendmentalsoclarifiedthetimingfordisclaimersoffutureinterestsforthefirsttime.Specifically,thefollowinglanguagewasaddedtoSection37A(a):“awrittenmemorandumofdisclaimerdisclaimingafutureinterestmaybefilednotlaterthanninemonthsaftertheeventdeterminingthatthetakerofthepropertyofinterestisfinallyascertainedandhisinterestisindefeasiblyvested.”9TherelevantprovisionoftheTexasPropertyCodeconcerningdisclaimersofpropertyfromanintervivostrustwasalmostidentical.10

Thedefinitionofaqualifieddisclaimerforfederaltaxpurposesusesthefollowinglanguagetodefinethepermissibletimingwithrespecttoadisclaimerofafutureinterest:“notlaterthanthedatewhichis9monthsafter...thedayonwhichthetransfercreatingtheinterestinsuchpersonismade....”11TheTreasuryRegulationsprovidethat“[w]ithrespecttointervivostransfers,atransfercreatinganinterestoccurswhenthereisacompletedgiftforFederalgifttaxpurposes....”12BecauseofthediscrepancybetweenSection37Aandfederallaw,adisclaimerofafutureinterestcouldbeeffectiveunderTexaslawwhilenotconstitutingaqualifieddisclaimerforfederaltaxpurposes.

Forexample,thedisclaimerofacontingentremainderinterestinatestamentarytrustissubjecttodifferentdeadlinesfortreatmentasaqualifieddisclaimerunderfederallaworasaneffectivedisclaimerunderTexaslaw.Inthissituation,aqualifieddisclaimerofacontingentremainderinterestthatvestsuponthedeathofthelifetimebeneficiarymustbemadewithinninemonthsofthedecedent’sdateofdeath(i.e.the“dateonwhichthetransfercreatingtheinterestin[thedisclaimant]ismade”).13Incontrast,adisclaimerpursuanttoSection37Awouldbeeffectivesolongasitwasmadewithinninemonthsafterthedeathofthelifetimebeneficiary(i.e.the“eventdeterminingthatthetakerofthepropertyisfinallyascertainedandhisinterestisindefeasiblyvested”).14

7Tex.Prob.Code§37A(d)(1971)8SeeI.R.C.§2518(b).9Tex.Prob.Code§37A(a)(1977).10FormerTex.Prop.Code§112.010(c‐2)(2)(memorandumofdisclaimermustbedeliveredtothetrustee“notlaterthanthedatethatisninemonthsafterthe...dateoftheeventthatcausesthetakeroftheinteresttobefinallyascertainedandtheinteresttobeindefeasiblyvested.”).11I.R.C.§2518(b)(2).SeealsoJewettv.Comm’r,455U.S.305,315‐16(1982).12Treas.Reg.§25.2518(c)(3)(i).13SeeTreas.Reg.§25.2518(c)(5)Ex.1,3;Jewett¸455U.S.at305(underformerversionofI.R.C.§2518requiringdisclaimer“withinareasonabletimeafterknowledgeoftheexistenceofthetransfer”,theCourtheldthat“disclaimersofacontingentinterestinatestamentarytrust,thougheffectiveunderlocallaw,werenotmadeuntil33years,andthusnot‘withinareasonabletime,’aftertheinterestwascreated,thedisclaimersweresubjecttoagifttax....”).14NotethatthedeadlinewouldbethesameinthecaseofadisclaimerofaninterestinanirrevocableintervivostrustpursuanttoTex.Prop.Code§112.010.


Finally,the1977amendmentincludedprovisionspermittingapersonalrepresentativetodisclaimpropertyonbehalfofanestateorawardwithcourtapproval,andpermittinganindependentexecutortodisclaimpropertyonbehalfofanestatewithoutcourtapproval.15

b. 1993amendment:relation‐backdoctrineandotherchanges

The1993LegislatureenactedseveralsubstantivechangestoSection37A.Priorto1993,Section37Aprovidedthatavaliddisclaimer“shallbeeffectiveasofthedeathofdecedent”butdidnotexplicitlyaddresstheissueofwhetheradisclaimermightconstituteafraudulenttransferastothedisclaimant’screditors.16Inresponsetothecourt’sholdinginDyerv.Eckols,thelegislatureaddedlanguagetotheinitialpartofSection37Acodifyingthe“relation‐back”doctrine.

Specifically,therevisedstatuteprovidedthat“[a]disclaimerevidencedasprovidedhereinshallbeeffectiveasofthedeathofdecedentandshallrelatebackforallpurposestothedeathofthedecedentandisnotsubjecttotheclaimsofanycreditorofthedisclaimant.”17Further,therevisedlanguagestatedthatadisclaimerunderSection37Aisnota“transfer”forthepurposesoftheBusiness&CommerceCode.

Codificationoftherelation‐backdoctrinehadsignificantimplicationsinthestatecreditor‐protectioncontextandinthefederalbankruptcycontext.Forexample,federalcourtshaveheldthatunderTexaslaw,pre‐petitiondisclaimersareeffectiveinthebankruptcycontext,18butpost‐petitiondisclaimersarenoteffectivetoremovepropertyfromthebankruptcyestate.19

The1993amendmentincludedlanguagethatisapplicablewhenthedecedent’swilldirectsthedispositionofdisclaimedproperty.20The1993amendmentalsoclarifiedthatapartialdisclaimerbyadecedent’ssurvivingspousedidnotconstituteadisclaimerofanyothertransferforthebenefitofthesurvivingspouse.21

c. Otheramendments

Amendmentsin1979,1987,1991,1995,and2011revisedprovisionsofSection37Aregardingthetypesofpropertythatcanbedisclaimed,thedisclaimerproceduresapplicabletocharitableorganizationsorgovernmentalagencies,andcertainterminology.The2007amendmentauthorizedcourt‐approveddisclaimersbyanagentappointedunderadurablepowerofattorneyauthorizingdisclaimers.22

15Tex.Prob.Code§37A(1977)(firstsentence).16SeeDyerv.Eckols,808S.W.2d531,533‐34(Tex.App.—Houston[14Dist.]1991,writdism’dbyagr.).17Tex.Prob.Code§37A(1993)(secondsentence).18MatterofSimpson,36F.3d450,453(5thCir.1994).19InreSchmidt,362B.R.318,326‐27(BkrtcyW.D.Tex.2007).20Tex.Prob.Code§37A(1993)(thirdsentence).21Tex.Prob.Code§37A(f)(1993).22Tex.Prob.Code§37A(a)(2007).


Finally,the2013amendmentaddedEstatesCodeSection122.107,whichprovidedthatadisclaimerbyadelinquentchildsupportobligorisineffective.23The2013amendmentalsoimposedanaffirmativerequirementthatanymemorandumofdisclaimerincludeastatementregardingwhetherthedisclaimantisachildsupportobligor.24

3. EstatesCodeChapter122

StartingonJanuary1,2014,Section37AwasreplacedbyChapter122.Aspartofthecodificationprocess,Section37A,whichconsistedofseventeensubsections,wasreorganizedintofoursubchaptersunderChapter122oftheEstatesCode,with21totalsections.

Despitethemanytechnicaladditionsandthesheervolumeofthestatuteasamended,Chapter122retainedoneprovisionoftheoriginalstatutenearlyverbatim:“adisclaimerthatdoesnotcomplywiththischapterisineffective...[except]asanassignmentofthedisclaimedproperty....”Aswiththeoriginalsix‐subsectionstatute,Chapter122requiredtechnicalcompliancewithallformalrequirementstoqualifyasaneffectivedisclaimer.

B. Equitablerescissionofdisclaimers

Section122.004oftheEstatesCodestatedthatadisclaimerthatisfiledandservedasprovidedinChapter122isirrevocable.25Thisprovisionisconsistentwiththerequirementofirrevocabilityforaqualifieddisclaimerforfederaltaxpurposes.26Section122.004appliedregardlessofwhetherthedisclaimantunderstoodhowthedisclaimedpropertywouldbedistributed.

Forexample,inNorthwesternNationalCasualtyCo.v.Doucette,27theFortWorthCourtofAppealsheldthatanheir’sdisclaimerofherinterestinherfather’sestatewaseffectiveandirrevocabledespitethefactthatshewasmistakenaboutwhothedisclaimedpropertywouldpassto.Thedisclaimerrecitedthedisclaimant’sbeliefthatthedisclaimedpropertywouldpasstohermother,thedecedent’ssurvivingspouse.However,thedisclaimantwasunawarethatthedecedenthadlegallyadoptedanotherchild,meaningthattheadoptedchildwouldreceivethedisclaimedproperty.TheDoucettecourtupheldthetrialcourt’sfindingthatthedisclaimerwasvalidandirrevocable“inspiteoftheprobableunintendedresultsofthepropertydistribution.”28

23FormerTex.Est.Code§122.107.24FormerTex.Est.Code§122.051(b).25FormerTex.Est.Code§122.004.26SeeI.R.C.§2518(b).27Nw.Nat.Cas.Co.v.Doucette,817S.W.2d396(Tex.App.—FortWorth1991,writdenied).28Id.at399.


Similarly,inBakerBottsv.Cailloux,29theSanAntonioCourtofAppealsrejectedatrialcourt’sawardofaconstructivetrusttocompensateadisclaimantforanallegedlymistakendisclaimer.ThedisclaimantinCaillouxdisclaimedherinterestinherhusband’sresiduaryestate,causingsignificantassetstopasstodesignatedcharities.Severalyearslater,afterthedisclaimanthadbeendiagnosedwithAlzheimer’sdisease,heragentunderadurablepowerofattorneyfiledalawsuitagainsttheexecutorofthehusband’sestateandtheattorneyswhohadrepresentedtheexecutorandthedisclaimantforbreachoffiduciarydutyamongotherclaims.Thejuryfoundthattheexecutorandthelawfirmhadbreachedtheirfiduciarydutiestothedisclaimantbyfailingtofullyandfairlydiscloseallimportantinformationtoher.Inawardingdamagesof$65millionagainstthedefendantstobeheldinaconstructivetrustforthedisclaimant’sbenefit,thetrialcourtstatedthatitwasexercisingits“equitablepowers”to“place[thedisclaimant]inthepositionshewouldhaveheldbutforthebreachoffiduciaryduty…andhadshenotsignedthedisclaimer.”30

TheCaillouxcourtdeterminedthatthetrialcourt’sdecisionwaserroneousbecausetherewasnoevidencethatanybreachoffiduciarydutyhadcausedthedisclaimanttodisclaimherinterestinproperty.Ofgreaterrelevance,thecourtstatedthatthetrialcourt’simpositionofaconstructivetrustwouldnothavebeenappropriateevenifcausationhadbeenprovedattrial.Thisequitableremedywasnotappropriatebecausethedefendantsdidnotholdlegaltitletothedisclaimedproperty.Becausetheallegedwrongdoerswerenotthepersonswhoreceivedthepropertyasaresultofthedisclaimer,thecourtstatedthatitwasnotwithinthecourt’sequitablepowerstoorderthedefendantstoreturnthedisclaimanttoherpre‐disclaimerposition.

IncontrasttoDoucetteandCailloux,inatleastonecaseaTexascourthasfoundthatadisclaimermaybedeemedineffectiveifthedisclaimantexecutedthedisclaimerinrelianceonafactualmistake.InMcCuenv.Huey,31thepotentialdisclaimantexecutedanaffidavitfiledwiththeAlabamacourtinwhichhisbrother’sestatewasbeingadministered.Theaffidavitrecited“disclaimant’s”beliefthatthespecificgiftfromthedecedenttothedisclaimantunderthewillhadbeenadeemedandthatheconsentedtothedistributionofallpropertyofthedecedenttotheresiduarybeneficiary.Contrarytothisbelief,thedecedenthadownedthegiftedproperty(Texasrealproperty)atdeath.

TheheirsoftheresiduarybeneficiaryarguedthattheaffidavitshouldbetreatedasadisclaimerforthepurposesofdeterminingtitletotheTexasrealproperty.However,thecourtconcludedthattheaffidavitwasnotaneffectivedisclaimerbecause“tobeeffective,adisclaimerofaninheritanceisenforceableagainstthemakeronlywhenithasbeenmadewithadequateknowledgeofthatwhichisbeingdisclaimed.”32

29BakerBotts,L.L.P.v.Cailloux,224S.W.3d723(Tex.App.—SanAntonio2007,pet.denied).30Id.at733.31McCuenv.Huey,255S.W.3d716,722(Tex.App.—Waco2008,nopet.).32Id.at731.


NotethatalthoughtheMcCuendecisionwasissuedin2008,thepurporteddisclaimerwasexecutedinthe1960s,priortotheenactmentofSection37A.Further,althoughtheMcCuencourtreferencedSection37Ainitsdiscussionofthepotentialdisclaimer,itreacheditsconclusionwithoutconsideringwhethertheaffidavitsatisfiedthetechnicalrequirementsforastatutorydisclaimer.Finally,theresultinMcCuenhasnotbeencitedinanycasedecidedunderSection37AorChapter122.Accordingly,thereremainedquestionsastowhetheraneffectivedisclaimerunderChapter122couldberevokedordeemedineffectivebasedonamistakeoffact.

C. ProblemswithChapter122

1. Mustmeetallrequirementstobeeffective

Section122.102oftheEstatesCodeprovidedthat“adisclaimerwhichdoesnotcomplywiththischapterisineffective”exceptasanassignmentofproperty.Thereare21sectionsofChapter122dealingwithdisclaimers,andmanyimposerequirements.Inorderforherdisclaimertobeeffective(aprerequisitetobeingaqualifieddisclaimerforfederaltaxlawpurposes),thedisclaimanthadtocomplywithalloftheserequirements:

Thedisclaimerhadtobeinwritingandnotarized.33

Ithadtoincludeastatementregardingwhetherthedisclaimantwasa“childsupportobligor”whetherthedisclaimanthadminorchildren,ornot.34

Ithadtobefiledinthedecedent’sprobateproceeding,35exceptinsomecasesithadtobefiledwiththecountyclerk’sofficeinthecountyofthedecedent’sresidence,36filedwiththecountyclerkofthecountyinwhichrealpropertyownedbyanon‐residentdecedentislocated,37withinninemonthsofthedecedent’sdeath,38exceptinthecaseofafutureinterest39andexceptifthedisclaimantwasacharity.40

Inadditiontothefilingrequirement,adisclaimerhadtobedeliveredinpersontoormailedbyregisteredorcertifiedmailtoandreceivedbythepersonalrepresentativeofthedecedent’sestatewithinninemonthsofthe

33FormerTex.Est.Code§122.051(a).34FormerTex.Est.Code§122.051(b).35FormerTex.Est.Code§122.052.36FormerTex.Est.Code§122.053.37FormerTex.Est.Code§122.054.38FormerTex.Est.Code§122.055(a).39FormerTex.Est.Code§122.055(b).40FormerTex.Est.Code§122.055(c).


decedent’sdeath,41exceptinthecaseofafutureinterest,42andexceptifthedisclaimantwasacharity.43

Thedisclaimantcouldnothave“previouslyacceptedthepropertybytakingpossessionorexercisingdominionandcontrolofthepropertyasabeneficiary.”44

Thereweresimilar,butslightlydifferent,requirementsforabeneficiarytodisclaimaninterestinatrust(deliveredtothetrustee,45or,iftherewasnotrustee,tothetransferoroftheinterestorhislegalrepresentative46).

Theserequirementswereunnecessarilyburdensome.Forexample:

Itshouldnothavebeennecessarytobothfilewiththecourtanddelivertotheexecutorinordertomakethedisclaimereffective.

Itshouldhavebeenpossibletosendthenoticetotheexecutorbycourierordeliveryservice,butthestatuterequireddeliveryinpersonorregisteredorcertifiedmail.

Itshouldhavebeensufficientifthenoticewasmailedtotheexecutorbythedeadline–thedisclaimantshouldnothavebeenrequiredtoassurethatitwasreceivedbytheexecutorbythedeadline.

And,ofcourse,itisridiculousthatadisclaimermayhavebeenineffectivesimplybecauseitomittedastatementthatthedisclaimantwasnota“childsupportobligor.”47

2. TheTexasdeadlinesdidn’tmatchupwiththetaxdeadlines

ThedeadlinesintheTexasstatutesclearlywerebasedonthenine‐monthdeadlineforqualifieddisclaimersfortaxpurposes.However,asdiscussedabove,theTexasdeadlinesdidnotmatchthetaxdeadlinesperfectly.48

3. Disclaimerbyatrustee

WhathappenedunderChapter122orTrustCodeSection112.010ifatrusteedisclaimedpropertywhichotherwisewouldhavepassedintoatrust?Wouldthe

41FormerTex.Est.Code§122.056(a)(1).42FormerTex.Est.Code§122.056(a)(2).43FormerTex.Est.Code§122.056(b).44FormerTex.Est.Code§122.104).45FormerTex.Prop.Code§112.010(c‐2)(2).46FormerTex.Prop.Code§112.010(c‐2)(2).47Thisrequirementwasaddedin2013.Therequirementmaybeusefulinafewchildsupportcases,butfailingtoincludethestatementinthe99%ofthecaseswherechildsupportisnotanissueshouldnothavemadethedisclaimerineffective.48See“1977amendment:coordinationwithfederaltaxlaw”inArticle1above.


propertyhavepassedintothetrust?InTAM8549004,whichappearstoapplyTexaslaw,theInternalRevenueServiceconcludedthatapplicablestatelawdidnotpermitatrusteetodisclaimpropertytoavoidhavingthepropertypassintothetrust.49Thiswasbasedonthreefactors:

a. Thetrustee,asafiduciary,hadnoauthoritytounilaterallyrenounceaportionofthetrustpropertyonbehalfofbeneficialinterests.

b. Thebeneficiaries,holdingequitabletitletotrustproperty,wereentitledtohavethepropertiesdistributedtothetrust.

c. Thestate’sdisclaimerstatutedidnotbroadenatrustee’sfunctionsoastoempowerthetrusteetounilaterallydisclaimproperty.Rather,itcouldbeusedonlybypersonswithbeneficialinterests.

Texasappellatecourtshavenotruledonthisissue,soitisnotclearifaTexascourtwouldagreewiththisanalysis.50

Underpriorlaw,ifthetrustee’sdisclaimerwasaccompaniedbythebeneficiaries’disclaimeroftheproperty,thedisclaimersshouldhavebeeneffectivetokeepthepropertyoutofthetrust.51Further,ifthetrusteeaskedacourttoapprovethedisclaimer,theper‐sebreachoffiduciarydutyissuecouldhavebeenavoided.Section115.001(a)oftheTrustCodepermitsacourttorelieveatrusteefromanydutyimposedbythetrustinstrumentorbylaw.Section112.054(a)oftheTrustCodepermitsacourttodirectorpermitthetrusteetodoactsthatarenotauthorizedorareforbiddenbythetermsofthetrust.

Still,thiswasaverylongwayaroundtheproblem.ItseemslikelythatadifferentresultwouldbereachedunderthereasoninginTAM8549004ifstatelawexpresslypermittedatrusteetodisclaimandifthelawclearlyprovidedthattheresultofthedisclaimerwouldbethatthedisclaimedpropertydoesnotpassintothetrust.52

4. Disclaimerofsurvivorshipproperty

Federallawpermitsadisclaimerofsurvivorshipproperty.53Chapter122defineda“beneficiary”whoispermittedtodisclaimasincludingpersonsreceivingpropertyasaresultofthedeathofanotherpersonbycommunitypropertywithrightofsurvivorship,jointtenancywithrightofsurvivorshiporbysurvivorshipagreement,54

49IRSTAM8549004(Aug.30,1985).50SeeE.DianeThompson,MichaelJ.Cenatiempo,PracticalLookatDisclaimers:DoesPhaseoutofExemptionsandRateCutsinNewLawMakeDisclaimerstheTechniqueofChoiceforMost?RisksandRewards(IncludingConflictsandAvoidingClaimsbyUnder‐RepresentedDisclaimants)at57‐61,26thAnnualAdvancedEstatePlanning&ProbateCourse(June2002).51SeePLRs8729008,8804004and9745008.52Section8oftheUniformDisclaimerofPropertyInterestsActsoprovides.53Treas.Reg.§25.2518‐2(c)(4).54FormerTex.Est.Code§122.001.


butChapter122didnotgiveanymorespecificsaboutdisclaimingsurvivorshipproperty.

2. ThenewTexasUniformDisclaimerofPropertyInterestsAct

TheTexasUniformDisclaimerofPropertyInterestsAct(the“TexasDisclaimerAct”),whichreplacesthedisclaimerprovisionsofChapter122oftheEstatesCodeandSection112.010oftheTrustCode,iseffectiveSeptember1,2015.55ItisfoundinnewChapter240ofthePropertyCode.56

TheNationalCouncilofCommissionersonUniformStateLaws(NCCUSL)firstadoptedtheUniformDisclaimerofPropertyInterestsActin1999.Itwaslastupdatedin2010.Eighteenstateshaveenactedversionsofthe1999act.

TheTexasDisclaimerActisdividedintofoursubchapters:SubchapterA–“GeneralProvisions;”SubchapterB–“TypeandEffectofDisclaimer;”SubchapterC–“DeliveryorFiling;”andSubchapterD–“DisclaimerBarredorLimited.”Differenttypesofdisclaimersareaddressedseparately.Forinstance,disclaimersbyindividualsofpropertypassingbecauseofadecedent’sdeatharegovernedbySection240.0511,whiledisclaimersofpropertypassingforreasonsotherthanadecedent’sdeatharegovernedbySection240.0512,anddisclaimersofrightsinsurvivorshippropertyaregovernedbySection240.052.Likewise,thedeliveryorfilingrequirementsapplicabletodisclaimersdependonthenatureofpropertyorinterestbeingdisclaimed.

A. SummaryofkeyfeaturesoftheTexasDisclaimerAct

ThispapergoesintogreaterdetailabouttheTexasDisclaimerActlater,buthereisasummaryofsomeofitskeyfeatures:

1. Thereisjustonestatute

TheTexasDisclaimerActaddressesdisclaimersofalltypesofpropertyinChapter240ofthePropertyCode.TherenolongerareseparateEstatesCodeandTrustCodestatutes.

2. Thereisnostatelawtimelimitfordisclaimers

Priorto1977,federaltaxlawdidnothaveahard‐and‐fastnine‐monthdeadlineforqualifieddisclaimers.Likemoststates,Texasreactedtothe1977taxlegislationbyadoptinganine‐monthdeadlineinitsstatute.However,thereisnoreasonwhydisclaimersunderstatelawneedtobetiedtothatdeadline.Asnotedabove,

55ThechangeinthedisclaimerstatutesraisesissuesaboutwhichstatutetofollowifthedecedentdiedpriortoSeptember1,2015.See“Effectivedateissues”inthisarticlebelow.56REPTLtriedtohavetheTexasDisclaimerActplacedinChapter122oftheEstatesCode,sincethatiswherepractitionerslogicallywouldlookforit,butLegislativeCouncilrequiredittobeplacedinthePropertyCode.Oneoftheauthors(Tom)likesitthisway.Therearecross‐referencestothenewstatutesinChapter122oftheEstatesCodeandSection112.010oftheTrustCode.


problemsarisebecausetheTexasnine‐monthdeadlinedoesnotmatchperfectlywiththetaxlawdeadline.ThoseproblemsareeliminatediftheTexasstatutehasnodeadline.Thisisevenmorerelevantinlightoftherecentincreaseintheapplicableexclusionamountforfederalestatetaxpurposes.Fewerandfewerdisclaimerswillbetax‐based,sothereislessandlessofareasontotieTexas’sstatutetothetaxlawdeadline.

Foramoredetailedanalysisregardingfederalpreemptionissuesandotherimplicationsofthedecoupleddeadline,seeArticle3below.

3. Therearelessrestrictivetechnicalrequirements

ManyoftheduplicativeandlogisticallychallengingtechnicalrequirementsapplicableunderChapter122havebeeneliminatedintheTexasDisclaimerAct.Forexample,whendisclaimingpropertypassingbywillorintestacyinanestatesubjecttoadministration,theTexasDisclaimerActpermitsdeliveryofthedisclaimertotheexecutortosuffice.Itisnotnecessaryalsotofileadisclaimerintheprobateproceeding.

4. Differenttypesofpropertyarespecificallyaddressed

TheTexasDisclaimerActincludesprovisionsthatarespecificallydesignedtoaddressuniquecharacteristicsofdifferenttypesofpropertyandownershipstructures.Forexample,therearespecificprovisionsregardingsurvivorshippropertyandbeneficiarydesignationpropertywhicharemissinginChapter122.

5. Fiduciarydisclaimersareexpandedwithclearrulesfordifferenttypesoffiduciaries

TheTexasDisclaimerActmoreclearlyaddressesthedisclaimerofinterestsandpowersbyfiduciaries.Therulesfordisclaimersbydifferenttypesoffiduciariesarestated.Trusteesareexpresslypermittedtodisclaimproperty,causingthepropertynottopassintothetrust.Forguardians,dependentadministratorsandtrusteesofcourt‐createdtrusts,priorcourtapprovalisrequired.Thetrusteeofanon‐court‐createdtrustmayseekcourtapprovalormaymakethedisclaimerwithoutcourtapprovalbygivingthebeneficiaries30days’notice.Courtapprovalisrequirediftheeffectofthefiduciarydisclaimeristocausethepropertytopasstothefiduciaryindividually.Thedutiesoffiduciariesinmakingdisclaimersareclarified.

B. AguidetousingtheTexasDisclaimerAct

Attachedtothispaperisasection‐by‐sectionanalysisoftheTexasDisclaimerAct.Hereisadiscussionofsomeoftheimportantissuestounderstandinordertousethenewstatute.


1. Effectivedateissues

TheTexasDisclaimerActbecameeffectiveSeptember1,2015,andappliestodisclaimersofanyinterestinorpoweroverproperty,whenevercreated.57Sections17and18ofHB2428providethattheTexasDisclaimerActappliesifthefilingandnoticeprovisionsundertheformerlawhavenotelapsed.Ifthetimeforfilingordeliveringnoticeofawrittenmemorandumofdisclaimerunderformerlawhaselapsed,theformerlawappliesandiscontinuedineffectforthatpurpose.

Thismeansthat,whiletheeffectivedateoftheactwasSeptember1,2015,theoperativedateisDecember1,2014.Iftheeventgivingrisetothedisclaimer(forexample,thedeathofadecedent)occurredonorafterDecember1,2014,58thenine‐monthdeadlineunderthepriorlawhadnotlapsedpriortotheeffectivedateofthenewact,sothenewdisclaimerrulesapplyandthereisnotimelimitfordisclaiming.IfthedecedentdiedNovember30,2014,thenine‐monthdeadlinelapsedpriortotheeffectivedate,sotheolddisclaimerrulesapply.

2. Illustratingthebasics:Anon‐fiduciarydisclaimerinadecedent’sestate

Whatarethekeystodisclaiminginthesimplestofcases–adisclaimerbyanindividualofpropertyreceivedfromadecedent’sestate?

a. Thereisnodeadline,solongasthedisclaimerismadebeforeacceptingtheproperty.

OneofthemajorchangesoftheTexasDisclaimerActisabandonmentofthenine‐monthdeadlinefordisclaimers.Adisclaimerstillmayhavetobemadewithinninemonthsofthedecedent’sdeathtobeaqualifieddisclaimerfortaxpurposes,butadisclaimercanbeeffectiveforstatelawpurposesevenifitismademorethanninemonthsafterthedecedent’sdeath.

Whatsetsthestatelawdeadlineforadisclaimerunderthenewstatute?Acceptance.Adisclaimerisbarredif“thedisclaimantacceptstheinterestsoughttobedisclaimedby:(A)takingpossessionoftheinterest;or(B)exercisingdominionandcontrolovertheinterest.”59The“takingpossession”and“exercisingdominionandcontrol”languagewasintentionallyaddedtotheTexasversionoftheuniformactsothattheacceptancestandardunderpriorlawwillnotchange.60

57Tex.Prop.Code§240.003.58DeterminingtheapplicablelawifthedeathoccurredexactlyonDecember1,2014,istricky.Tex.Est.Code§122.055providesthatthedisclaimermustbefiled“notlaterthanninemonthsafterthedateofthedecedent’sdeath.”NinemonthswouldfallexactlyonSeptember1,2015,whichistheeffectivedateofthenewact.Thisprobablymeansthatthenewlawapplies,butitwouldbesafertocomplywiththeformerlawandcompletethedisclaimerpriortoSeptember1,2015.59Tex.Prop.Code§240.151(b)(1).Adisclaimeralsoisbarredbyawrittenwaiver,ifthedisclaimantvoluntarilyassigns,conveys,encumbers,pledges,ortransferstheinterest,oftheinterestsoughttobedisclaimedissoldunderajudicialsale.SeeTex.Prop.Code§240.101.60SeeFormerTex.Est.Code§122.104andformerTex.PropCode§112.010(c‐1).


Practice Tip: Take advantage of the safe harbor rule when delivering disclaimers. If the disclaimer is sent by certified mail to an address the disclaimant believes is valid, delivery is deemed to have occurred on the date of mailing even if the recipient never receives the disclaimer.

Thisshouldmakeitpossibleforadebtorwhohasnotfiledapetitioninbankruptcytodisclaimpropertymorethanninemonthsafteradecedent’sdeathandtherebyavoidhavingthepropertygotothedebtor’screditors,solongasthedebtorhasnotacceptedtheproperty.61

Whatiftheindividualwishingtodisclaimalsoistheexecutoroftheestate?Noproblem.Acceptanceofpropertyinafiduciarycapacityisnotanacceptanceofthepropertyinanindividualcapacityanddoesnotbaradisclaimerinanindividualcapacity.62Practitionersbelievethatthesameresultwouldhavebeenreachedundertheformerlaw,buttheformerlawdidnotexpresslystateit.

b. Whatmustthedisclaimerinstrumentcontain?

Tobeeffective,adisclaimermustbeinwriting,declarethedisclaimer,describetheinterestorpowerdisclaimedandbesignedbythepersonmakingthedisclaimer.63Itdoesnotneedtobenotarized,unlessofcourseitmustberecordedintherealpropertyrecords.Ifthepersonisdisclaimingapartialinterest,heorshemayexpressthatinterestasafraction,percentage,monetaryamount,termofyears,limitationofapower,oranyotherinterestorestateintheproperty.64

c. Whataboutdeliveringorfilingit?

Ifthereisapersonalrepresentativeoftheestate,thedisclaimermustbedeliveredtothepersonalrepresentative,65anditdoesnothavetobefiledorrecordedanywhere.Itmaybedeliveredbypersonaldelivery,first‐classmail,facsimile,e‐mail,or“anyothermethodlikelytoresultinthedisclaimer’sreceipt.”66Ifthat’stooloosey‐gooseyforthedisclaimant,thereisasafeharbor:ifthedisclaimerismailedtotheintendedrecipientbycertifiedmail,returnreceiptrequested,atanaddressthedisclaimantingoodfaithbelievesislikelytoresultinthedisclaimer’sreceipt,deliveryisconsideredtohaveoccurredonthedateofmailingregardlessofreceipt.67

Ifthereisnopersonalrepresentativeoftheestate,thedisclaimermustbefiledintheofficialpublicrecordsofanycountyinwhichthedecedentwas

61See“1993amendment:relation‐backdoctrineandotherchanges”inArticle1aboveand“Disclaimant’sbankruptcy”inArticle3below.62Tex.Prop.Code§240.151(c).63Tex.Prop.Code§240.009(a).ItalsomustbedeliveredorfiledasprovidedelsewhereintheAct(see“Whataboutdeliveringitorfilingit?”inthisarticlebelow).64Tex.Prop.Code§240.009(b).65Tex.Prop.Code§240.102(1).66Tex.Prop.Code§240.101(a).67Tex.Prop.Code§240.101(b).


domiciledonthedateofdeathorownedrealproperty.68Thus,ifitisunclearifthedecedentwasdomiciledinCollinCounty,whereherhomeislocated,orinDallasCounty,wherethenursinghomeinwhichsheresidedatdeathislocated,thedisclaimantsafelymayfilethedisclaimerinanycountyinwhichthedecedentownedrealpropertyanditwillbeeffectivewithrespecttootherrealandpersonalpropertyeveniftheotherpropertyisnotlocatedinthecountyoffilingorifthedecedentwasnotdomiciledinthecountyoffiling.

d. Towhomdoesthedisclaimedpropertygo?

Ifthewillorotherinstrumentcreatingtheinterestsayswhereitgoesintheeventofadisclaimer,theinterestgoeswheretheinstrumentsaysitgoes.69Underpriorlaw,thetestatororsettlorhadtheabilitytocontrolwheredisclaimerswentbyincludingprovisionsintheinstrument.ThisabilitymaytakeongreaterimportanceundertheTexasDisclaimerActbecauseoftheabandonmentofthenine‐monthdeadlinefordisclaimers.Currently,manywell‐draftedwillsandtrustsaddresswhathappenswhenasurvivingspousedisclaimsproperty–causingittopassintoacredit‐sheltertrust.70Inthefuturedraftersmaycomeupwithmorecreativewaystoplanfordisclaimers.71

Iftheinstrumentdoesnotsaywherethedisclaimedpropertygoes,thenitpassesasifthedisclaimanthaddiedimmediatelybeforethedecedent’sdeath.72ThereareprovisionsintheTexasDisclaimerActthataddresspassageofthepropertyinmoreunusualcases,suchaswhenthedisclaimantisacharityorothernon‐naturalperson73orwhenthereareunusualfactsmakingitdifficulttodeterminethetakersoftheproperty.74

e. Whenisthedisclaimereffective?

Thedisclaimertakeseffectasofthetimeofthedecedent’sdeathandrelatesbackforallpurposestothetimeofthedecedent’sdeath.75This“relatesback”languagewasintentionallyaddedtotheTexasversionoftheuniformacttomakeitclearthatTexasstillfollowstherelation‐backdoctrine.Adisclaimedinterestisnotsubjecttotheclaimsofanycreditorofthedisclaimant.76

68Tex.Prop.Code§240.102(2).69Tex.Prop.Code§240.051(d).70ThistechniqueispossiblebecauseTreas.Reg.§25.2518‐2(e)(2)permitsasurvivingspouse–andonlyasurvivingspouse–todisclaimpropertyandstilltoretainaninterestinandpoweroverthatpropertywithoutadversetaxconsequences.71See“Anticipatingpossibledisclaimerswhendraftingestateplanningdocuments”inArticle4below.72Tex.Prop.Code§240.051(e)(2).73Tex.Prop.Code§240.051(e)(1).74Tex.Prop.Code§240.0511.75Tex.Prop.Code§240.051(b).76Tex.Prop.Code§240.051(b)(2).Thismaynotbethecaseifthedisclaimerismadeafterthedisclaimantisthesubjectofabankruptcyproceeding.See“1993amendment:relation‐backdoctrineandotherchanges”inArticle1aboveand“Disclaimant’sbankruptcy”inArticle3below.


3. Disclaimersofothertypesofpropertyandinothersituations

OneofthebenefitsoftheTexasDisclaimerActisthatitprovidesspecificguidancefordisclaimingpropertyreceivedfromdifferentsources.

a. Survivorshipproperty

Todisclaimpropertypassingbyrightofsurvivorship,thedisclaimantmustgivenoticeofthedisclaimertothepersontowhomthedisclaimedinterestpasses,77andthedisclaimedinterestpassesasifthedisclaimantpredeceasedtheholdertowhosedeaththedisclaimerrelates.78

b. Beneficiarydesignationproperty

Todisclaimpropertypassingbybeneficiarydesignation:

Ifthedisclaimeroccursbeforetheinterestpassingbybeneficiarydesignationbecomesirrevocable,thedisclaimantmustgivenoticeofthedisclaimertothepersonmakingthebeneficiarydesignation.79Thus,ifasonisdisclaimingbenefitsfromhismother’sIRAwhilesheisstillliving,hemustdeliverthedisclaimertohismother,nottotheIRAcustodian(assumingthattheIRAbeneficiarydesignationbecomesirrevocableonthemother’sdeath).

Ifthedisclaimeroccursaftertheinterestpassingbybeneficiarydesignationbecomesirrevocable,thedisclaimantmustgivenoticeofthedisclaimertothepersonobligatedtodistributetheinterest.80Thus,ifasonisdisclaimingbenefitsfromhismother’sIRAandthedisclaimeroccursafterhismother’sdeath,hemustdeliverthedisclaimertotheIRAcustodian,sinceitisthepersonobligatedtodistributetheinterest.

c. Trustproperty

Forabeneficiarytodisclaimaninterestinatestamentarytrust,thebeneficiarymustdeliverthedisclaimertothetrusteethenserving,or,ifthereisnotrusteethenserving,tothepersonalrepresentativeofthesettlor’sestate.Ifthereisnotrusteeorpersonalrepresentativethenserving,thedisclaimermustbefiledintheofficialpublicrecordofanycountyinwhichthedecedentownedpropertyonthedateofthedecedent’sdeathorintheofficialpublicrecordsofanycountyinwhichthedecedentownedrealproperty.81

Forabeneficiarytodisclaimaninterestinanintervivostrust,thebeneficiarymustdeliverthedisclaimertothetrusteethenserving.Ifnotrusteeisthenserving,the

77Tex.Prop.Code§240.106.78Tex.Prop.Code§240.240.052(c).79Tex.Prop.Code§240.105(b).80Tex.Prop.Code§240.105(c).81Tex.Prop.Code§240.103.


Example 2: Danny wishes to disclaim all property he may otherwise receive because of Teddy’s death, regardless of the form in which it passes. Danny is beneficiary of a BigCo life insurance policy, a BadCo life insurance policy and a BigBank IRA. Teddy, Danny and Sue are joint owners of a SmallBank right of survivorship account. Danny is a beneficiary under Teddy’s will.

Under the former Texas law, Danny would perfect his disclaimer (assuming all other requirements were met) by delivering it to the personal representative of Teddy’s estate and filing it in Teddy’s probate proceeding.

Under the new law, Danny must deliver disclaimers to:

o BigCo, which is the entity obligated to distribute the BigCo life insurance proceeds.

o BadCo, which is the entity obligated to distributed the BadCo life insurance proceeds.

o BigBank, which is the entity obligated to distribute the BigBank IRA proceeds.

o Sue, who is the party to whom the disclaimed survivorship interest in the SmallBank account passes. (It does not need to be delivered to SmallBank, and delivering it to SmallBank is not sufficient to make it effective.)

o The personal representative of Teddy’s estate, with respect to all probate property.

disclaimermustbefiledwithacourthavingjurisdictiontoenforcethetrust,intheofficialpublicrecordsofthecountyinwhichthesitusofadministrationofthetrustismaintainedorintheofficialpublicrecordsofthecountyinwhichthesettlorisdomiciledorwasdomiciledonthedateofthesettlor’sdeath.Inaddition,ifthesettlorisaliveandthetrustisirrevocable,thedisclaimermustbedeliveredtothesettlorofthetrustorthetransferoroftheinterest.82

d. Powersofappointment

TheTexasDisclaimerActhasspecificprovisionsregardingdisclaimersofpowersofappointmentorotherpowersnotheldinafiduciarycapacityanddisclaimersbytheappointeeof,orobjectortakerindefaultofexerciseof,apowerofappointment.83

e. Disclaimerofapowerbyagent.

Inthecaseofadisclaimerofapowerbyanagent,thedisclaimermustbedeliveredtotheprincipalortheprincipal’srepresentative.84

4. Apotentialtrapforthoseusedtousingtheformerlaw:Deliverytomultipleparties

ApotentialtrapundertheTexasDisclaimerActappliesifadisclaimantisdisclaimingmultipletypesofproperty.

Undertheformerlaw,atimelydeliveryofthedisclaimertothepersonalrepresentativeoftheestateandatimelyfilingintheprobateproceedingwouldbe

82Tex.Prop.Code§240.104.83Tex.Prop.Code§§240.054and240.055.84Tex.Prop.Code§240.110.


likelytobesufficienttoconstituteadisclaimerofprobateandnonprobateassets.85Underthenewlaw,becausedifferentpersonsareentitledtoreceivedeliveryofthedisclaimersofdifferenttypesofproperty,eithermultipledisclaimersmayhavetobepreparedanddeliveredtotheappropriaterecipientsorasingledisclaimermayhavetobedeliveredtomultiplerecipients.

Ifdisclaimersmustbedeliveredtomultiplepersons,shouldthedisclaimantprepareaseparatedisclaimerforeachrecipientoronecomprehensivedisclaimertobedeliveredtomultiplerecipients?Eithermethodshouldwork,solongastherequirementsofPropertyCodeSection240.009aremet:thedisclaimermustbeinwriting,declarethedisclaimer,describetheinterestorpowerdisclaimed,besignedbythepersonmakingthedisclaimerandbedeliveredorfiledasrequiredbyChapter240.Thismeans,forexample,thatadisclaimeroflifeinsuranceproceedsshoulddescribethepolicyanditsproceedsasthe“interestorpowerdisclaimed;”itprobablyisnotsufficienttosaythatthepersonisdisclaimingallpropertypassingbyreasonofthedeathofthedecedentsincethatdoesnotdescribetheinsuranceproceedsspecifically.

5. Fiduciarydisclaimers

TheTexasDisclaimerActhasextensiveprovisionsgoverningdisclaimersbyfiduciariessuchasguardians,personalrepresentatives,agents,andtrustees.Fiduciarydisclaimersaredifferentfromindividualdisclaimersbecauseofthedualrolesthefiduciaryplays.

Thepersonservingasfiduciaryhasindividualinterestsandpowers.Forexample,atrusteehasthepowertomakedistributionstotrustbeneficiariesbasedonthestandardinthetrustinstrument.Thepersonservingastrusteemaywishtodisclaimapoweroverpropertywhichheorshedoesnotwishtoholdorwhichmightcausetaxorcreditorproblemsifheorsheheldit.Thepersonmaywishtodisclaimanundesiredpowerevenbeforebeginningtoserveasfiduciary.

Asafiduciary,thepersonservesasarepresentativeofanother(asinthecaseofaguardian,executor,administratororagent)orastheholderoflegaltitleforthebenefitofbeneficiaries(asinthecaseofatrustee).Inrepresentingaward,estateoragentorinactingonbehalfofatrust,thefiduciarymaywishtodisclaiminterestsorpropertywhichotherwisewouldpasstotheward,estate,agentortrust.

Whileinmanyrespectsthesameissuesaffectingindividualdisclaimersalsoaffectfiduciarydisclaimers,theTexasDisclaimerActspecificallyaddressesthoseissueswhichareuniquetofiduciarydisclaimers.

85SeeFormerTex.Est.Code§122.056(a).Ifsomeofthepropertybeingdisclaimedwastrustproperty,italsomayhavebeennecessarytodeliverthedisclaimertothetrusteeofthetrust.SeeFormerTex.Prop.Code§112.010(c‐2).


a. Disclaimerofpowersbyapersondesignatedtoserveasorservingasafiduciary

Whatifatrustinstrumentgivesthenamedtrusteepowerswhichwouldconstituteageneralpowerofappointment?Thedesignatedindividualmaybewillingtoserveastrustee,butnotifthetrustpropertywouldbesubjecttohiscreditorsorincludedinhisestatefortaxpurposes.Theanswer,ofcourse,isthattheindividualmaydisclaimtheoffendingpowers.Howdoesthiswork,andwhatissuesmayarise?

Section240.007addressesdisclaimersofthistypeindetail.Itpermitsthepersondesignatedtoserveas,orservingas,fiduciarythepowertodisclaimanypoweroverproperty,includingapowerofappointmentandthepowertodisclaim.

Ifthepersonisdesignatedtoserveasatrustee,thedisclaimerofthispowercouldaffectbeneficiaries’rights.Forexample,ifthetrusteewishestodisclaimthepowertomakedistributionsforthebeneficiaries’“comfort,”thedisclaimermaysolveataxproblemforthetrustee‐designate,butitalsomayeliminateabeneficiary’srighttoreceivedistributionsforcomfort.TheTexasDisclaimerActaddressesthissituationby:

Requiringthepersontodisclaimthistypeofpoweronlyonorafteracceptingthetrust.

Makingitclearthatthedisclaimermustbecompatiblewiththetrustee’sfiduciaryobligations.86

Ifthetrusteeisservingwhenthedisclaimerismade,thetrusteeowesthebeneficiariesfiduciarydutiesandthedisclaimermustbecompatiblewiththoseduties.Ifthedisclaimerimproperlyandadverselyaffectsabeneficiary’srights,thebeneficiaryhasrecourseagainstthetrustee.Ofcourse,becauseinmanycasesadisclaimerofdistributivepowerswillnotharmthebeneficiariesandwillprovidetaxbenefits,givingthetrusteetheabilitytodisclaimisworthwhile.

Thisrequirement–thatatrusteemustfirstbegintoserveastrusteebeforedisclaimingapoweraffectingbeneficiaries’distributiverights–doesnotapplytoothertypesoffiduciariesortotrusteesifthepowerbeingdisclaimeddoesnotaffectbeneficiaries’rights.Intheseothersituations,thepersondesignatedtoserveasafiduciarymaydisclaimthepowerbeforebeginningtoserveasafiduciary.87Thismeansthatthepersondoesnotowefiduciarydutiestothebeneficiarywhenthedisclaimerisbeingmade.

b. Fiduciarydutiesversuscourtapproval

Asdiscussedbelow,somefiduciarydisclaimersrequirecourtapproval,whileothersdonot.Whetherornotitisrequired,“unlessacourtofcompetentjurisdiction

86Tex.Prop.Code§240.007(b).87Tex.Prop.Code§240.007(a).


approvesthedisclaimer,adisclaimerbyafiduciaryactinginafiduciarycapacitymustbecompatiblewiththefiduciary’sfiduciaryobligations.”88Thus,ifafiduciarygoesaheadwithadisclaimerwithoutcourtapproval,heorshefacespotentialliabilityforbreachoffiduciaryduty.

Anindependentexecutorhasadutytocollecttheassetsofthedecedent’sestate.Atrusteehasadutytopreservethetrust’scorpus.Howcananindependentexecutorortrusteeeverdisclaimwithoutbreachinghisorherfiduciaryduties?TheTexasDisclaimerActaddressesthisbysayingadisclaimerbyafiduciaryactinginafiduciarycapacity“isnotapersebreachofthefiduciary’sfiduciaryobligations.”89ThisavoidstheabsurdityofhavingtheTexasDisclaimerActpermitfiduciarydisclaimerswithoutcourtapprovalbutmakingthemimpossiblebyimposingfiduciaryduties.

Iffiduciarydisclaimersaresubjecttofiduciaryduties“unlessacourtofcompetentjurisdictionapprovesthedisclaimer,”doesthatmeanthatfiduciarieswhoobtaincourtapprovalcannotbechallengedlaterforthedecisiontodisclaim?Thisisalogicalreadingofthestatuteandprobablyishowitwillbeconstrued.Still,thestatutestopsshortofsayingthatafiduciaryobtainingcourtapprovalhasnofiduciarydutieswithrespecttothedecisiontodisclaim.

c. Equitableremediesvoidingthedisclaimerarenotavailable

Ifabeneficiarysuccessfullyshowsthatafiduciarybreachedhisorherfiduciaryobligationsinmakingadisclaimer,canacourtdeclarethedisclaimertobevoidorotherwisemakethedisclaimerineffective?No.TheTexasDisclaimerActexpresslydecidestheequitablerescissionissueforfiduciarydisclaimers:“Possibleremediesforabreachoffiduciaryobligationsdonotincludedeclaringanotherwiseeffectivedisclaimervoidorgrantingotherlegalorequitablereliefthatwouldmakethedisclaimerineffective.”90Thebeneficiaryislimitedtootherremedies–damagesorremoval,forexample.Thereasonforthisprovisionistoprovidefinalityandcertaintyabouttheeffectofadisclaimer.

Doesthiscompletelyeliminatethepossibilityofanequitablerescissionofadisclaimer?InMcCuenv.Huey,91discussedabove,thecourtheldadisclaimertobeineffectivebasedonamistakeoffact.EventhoughtheTexasDisclaimerActprecludesrescissionofafiduciarydisclaimerasaremedyforbreachoffiduciaryduty,theactdoesnotexplicitlyaddressrescissionofdisclaimersinanyothercontext(suchasadisclaimerbyanindividual,oradisclaimerbyafiduciarythatdidnotconstituteabreachoffiduciaryduty).

88Tex.Prop.Code§240.008(f).89Tex.Prop.Code§240.008(f).90Tex.Prop.Code§240.008(g).91McCuenv.Huey,255S.W.3d716,722(Tex.App.—Waco2008,nopet.).


Accordingly,theremaybeaslightopeningforequitablerescissionofadisclaimerifasituationsimilartothefactsofMcCuenaroseafterenactmentoftheTexasDisclaimerAct:adisclaimerbasedonamistakeoffactbysomeoneotherthanafiduciary.However,themostwell‐reasonedinterpretationofTexaslawisthatequitablerescissionofdisclaimersbasedonamistakeoflaworfact,eitherbeforeorafterenactmentoftheTexasDisclaimerAct,isnotavailable.Asdiscussedabove,thereareseveralreasonstodoubtthattheMcCuencourt’sreasoningappliestostatutorydisclaimersatall.Further,afterVermontadoptedtheUniformDisclaimerofPropertyInterestsAct,theVermontSupremeCourtconsideredasimilarquestion:couldamother’sdisclaimerofherinterestinherson’sestateberevokedbasedonherclaimthatshedidnotunderstandthedisclaimerthatsheexecuted?92Afterconsideringthelanguageoftheuniformactandreviewingothercaselaw,thecourtconcludedthat“disclaimersarenotrevocablebasedondisclaimant’smistakeoflaw”.93However,thecourtreservedtherighttorescindthedisclaimerifthefactfinderfoundundueinfluence,coercion,orincompetenceintheexecutionofthedisclaimer.94SincetheTexasDisclaimerActinstructscourtstoconsideruniformityamongstatesenactingtheuniformactinapplyingandconstruingit,95theVermontcourt’sinterpretationoftheuniformactislikelytobefollowedinTexas:disclaimersshouldalmostalwaysbeirrevocable,buttheremaybearemedyavailabletovictimsofespeciallyegregiouscasesofmanipulationandabuse.96

d. Disclaimersrequiringcourtapproval

Priorcourtapprovalofadisclaimerbyafiduciaryisrequiredinthesesituations:

Adisclaimerbyapersonalrepresentativewhoisnotanindependentexecutororindependentadministrator(inotherwords,aguardian,temporaryguardian,dependentadministrator,ortemporaryadministrator).

Adisclaimerbythetrusteeofacourt‐createdtrustestablishedunderChapter1301oftheEstatesCodeorSection142.005oftheTexasPropertyCode.

Adisclaimerthatwouldresultinaninterestinorpoweroverpropertypassingtothepersonmakingthedisclaimer.97

Therequirementofcourtapprovalifthedisclaimerwouldresultinaninterestorpoweroverpropertypassingtothepersonmakingthedisclaimerwasadded(1)toassurethatthefiduciarymakingthedisclaimerdoesnotpossessageneralpowerofappointmentforfederaltaxpurposesand(2)toprovidealayerofprotectionfor

92Carvalhov.EstateofCarvalho,978A.2d455(Vt.2009).93Id.at461.94Id.at463.95Tex.Prop.Code§240.005.96BecauseofTex.Prop.Code§240.008(g),rescissionwouldnotbeavailableifafiduciary(ratherthananindividual)madethedisclaimer,evenifthefactswereegregious,iftheclaimisbasedonabreachofthefiduciary’sfiduciaryobligations.97Tex.Prop.Code§240.008(c).


beneficiaries.Thisrequirementappliesonlytoadisclaimerbyafiduciary.Itdoesnotrequirecourtapprovalofadisclaimerif,asaresultofadisclaimerbyanindividual(non‐fiduciary),aninterestinorpoweroverpropertypassestothatindividual.Thispermitsthecommontechniqueofpermittingasurvivingspousetodisclaimaninterestwhichthenpassesintoacreditsheltertrustofwhichthespouseisabeneficiaryandtrustee.98

Thisrequirementwillimpedesometrusteedisclaimers.Ifthetrusteeistheoutrightrecipientofdisclaimedpropertyoracurrentorremainderbeneficiaryofatrustreceivingdisclaimedproperty,thedisclaimerrequirescourtapproval,sincethedisclaimerresultsinaninterestinorpoweroverpropertypassingtothepersonmakingthedisclaimer.Inmostcases,thismeansthatusingthesurvivingspouseoradescendantofthedecedentastrusteeforcesthattrusteetoseekcourtapprovalofadisclaimer.Theestateplannercandraftaroundthisproblembyusinganon‐family‐membertrusteeorincludingaprovisionappointingaspecialtrusteewhosesoleauthorityistomakedisclaimers.99

e. Disclaimersnotrequiringcourtapproval

Exceptforthethreecasesstatedabovewherecourtapprovalisspecificallyrequired,adisclaimerbyafiduciaryactinginafiduciarycapacitydoesnotrequirecourtapprovaltobeeffectiveunlesstheinstrumentthatcreatedthefiduciaryrelationshiprequirescourtapproval.100Thisincludesdisclaimersbyindependentexecutors,independentadministratorsoragentsunderpowersofattorney.

f. Aspecialcase:disclaimerbynaturalguardian

BorrowingaprovisionfromtheFloridaversionoftheuniformact,101theTexasDisclaimerActpermitsthenaturalguardian(parent)ofaminortodisclaimonbehalfoftheminoraninterestinorpoweroverpropertythattheminoristoreceivesolelyasaresultofanotherdisclaimer,butonlyifthereisnocourt‐appointedguardianandonlyifthedisclaimedinterestdoesnotpasstoorforthebenefitofthenaturalguardianasaresultofthedisclaimer.102

Thisprovidesthepotentialtosolveacommonproblemwithdisclaimers.Underpriorlaw,adisclaimerstrategymightnotworkbecauseaparentmakingadisclaimerhasminorchildrenwhowouldreceivethepropertyinsteadoftheintendedrecipient.Ifthechildwouldreceivethepropertyonlyifhermotherdisclaimed,thenthereisno

98Aspecialtaxrulepermitsaspousetodisclaimwhileretaininganinterestinthedisclaimedproperty.26U.S.C.§2518(b)(4)(A).Thespousemayserveastrusteeofatrustreceivingthedisclaimedpropertyonlyifherabilitytomakedistributionsislimitedbyanascertainablestandard.Treas.Reg.§25.2518‐2(e)(2).ATexasdisclaimerdoesnothavetocomplywiththesetaxrules,butadversetaxconsequencemayaccompanynoncompliance.99See“Draftingtopermitaspecialtrusteetomakedisclaimers”inArticle4below.100Tex.Prop.Code§240.008(b).101Section739.201(2),FloridaStatutes(2014).102Tex.Prop.Code§240.008(e).


policyreasonwhythemothershouldnotbepermittedtodisclaimonthechild’sbehalfwithoutcourtapproval,allowingthepropertytopassasifthemotherandallherdescendantspredeceased.

Thenaturalguardianmakingthistypeofdisclaimerisafiduciaryandowesfiduciarydutiestothechild.Sincethereisnocourtapproval,thedisclaimermustbecompatiblewiththenaturalguardian’sfiduciaryobligations.103

g. Trusteedisclaimers

AdrivingforceforadoptionoftheTexasDisclaimerActwastoallowdisclaimersbytrusteesthatcausethedisclaimedpropertynottopassintothetrust.Itmayhavebeenpossibletodothisunderformerlaw,buttheresultwasnotclearanditrequiredextrasteps.104

Ifatrusteedisclaimerresultsinpropertynotpassingintoatrustwithnoactionbyatrustbeneficiary,thetrustbeneficiaryisvulnerableandthetrusteeisfacedwithpossibleclaimsofbreachoffiduciaryduty.Becauseofatrustee’sdutytocollectandadministerthetrustcorpus,itmightbeapersebreachoftrustforatrusteetodisclaim.

REPTLconsidereddifferentwaystobalanceeaseofuse,protectionofthetrustee,andprotectionofbeneficiaries.TheUniformDisclaimerofPropertyInterestsActitselfallowstrusteedisclaimerswithoutnoticetobeneficiariesandwithoutcourtapproval.Commentstotheuniformactmentionthatatrusteewhodisclaimsissubjecttofiduciaryduties,butitdoesnotcontainastatutoryprovisiontothiseffect.Statesadoptingversionsoftheuniformacthaveapproachedtrusteedisclaimersinvarietyofways:

Followtheuniformact–permittrusteedisclaimerswithnonoticeandnocourtapproval.

Requirecourtapprovalforalltrusteedisclaimers.

Prohibittrusteedisclaimers.

i. Courtapprovalornotice

TheTexasDisclaimerActexpresslyallowstrusteedisclaimers.Ifthetrustisacourt‐createdtrust,courtapprovalofthedisclaimerisrequired.105If,asaresultofthetrustee’sdisclaimer,thetrusteeindividuallywillreceiveaninterestinorpoweroverproperty,courtapprovalofthedisclaimerisrequired.106Inallothercases,thetrusteehasachoice:

103Tex.Prop.Code§240.008(f).104See“Disclaimerbyatrustee”inArticle1above.105Tex.Prop.Code§240.008(c).106Tex.Prop.Code§240.008(c).


Practice Tip: A trustee concerned about liability for making a disclaimer can reduce or eliminate fiduciary liability by getting prior court approval. A trustee who is not worried about liability can expedite the disclaimer procedure and save money by using the notice procedure with waivers as appropriate.

Thetrusteemaygetcourtapproval;or

Thetrusteemaygivethebeneficiaries30days’noticepriortodisclaiming.107

Ifthetrusteechoosestogivenotice,theactcontainsdetailedprovisionsaboutwhichbeneficiariesareentitledtonotice,whatmustbeincludedinthenoticeandtherightsofbeneficiariesreceivingnotice.108

Atrustee’sdisclaimerwithoutcourtapprovalmustbecompatiblewiththetrustee’sfiduciaryobligations.109

Ifthetrusteechoosestoforegocourtapprovalandinsteadgivesnotice,mayheorsherequireadultbeneficiariestoconsentandreleaseclaimsasaconditiontomakingthedisclaimer?110ThepotentialproblemisTreas.Reg.§25.2518‐2(d)(1).Inordertobeatax‐qualifieddisclaimer,thedisclaimantcannotaccept“theinterestoranyofitsbenefits,expresslyorimpliedly,priortomakingthedisclaimer.”Thispreventsindividualsfromreceivingconsiderationformakingadisclaimer.Isthetrusteereceivingconsiderationifheorsheconditionsmakingthedisclaimerongettingarelease?Andifthedisclaimerisnotconditionedongettingtherelease,isthereconsiderationfortherelease?Thecasesonpre‐arrangedcomplexdisclaimerarrangementsareprettygenerousforthetaxpayer,soatrusteemightconsiderthispathafterfurtherresearchandsoul‐searching.111

ii. Wheredoesthedisclaimedpropertygo?

Ifatrusteedisclaimspropertythatwouldhavebecometrustproperty,theTexasDisclaimerActprovidesthatthepropertypassesasifallcurrent,presumptiveremainder,andcontingentbeneficiariesofthetrustdiedbeforethetrustbecameirrevocableorneverexisted(inthecaseofnon‐individualbeneficiaries).112Inotherwords,thetrustistreatedasneverhavingexistedforthepurposesofthedisclaimedproperty.Thepropertypassestothenextbeneficiaryprovidedunderthegoverninginstrument.

107Tex.Prop.Code§240.008(d).108Tex.Prop.Code§240.0081.109Tex.Prop.Code§240.008(f).SeethediscussioninSectionII.B.4.b.above.110Section114.032oftheTrustCodeprovidesthatawrittenagreement,includingarelease,betweenatrusteeandabeneficiaryisfinalandbindingonthebeneficiaryandanypersonrepresentedbythebeneficiaryiftheinstrumentissignedbyabeneficiarywithlegalcapacitywhohasfullknowledgeofthecircumstancessurroundingtheagreement.111SeeEstateofLassiterv.Commissioner,TCMemo2000‐324,andMonroev.Commissioner,124F3d699(5thCir.1997).112Tex.Prop.Code§240.053(c).


Practice Tip: A trustee’s disclaimer may be a way to avoid creation of a credit shelter trust. This may be useful if basis adjustment, not estate tax savings, is the primary objective.

The technique works in pecuniary bypass/residuary marital plans since the disclaimer of the pre‐residuary gift causes the property to pass as part of the residuary.

The technique is not likely to work in pecuniary marital/ residuary bypass plans unless:

o The surviving spouse does not need the assets that would otherwise pass into the credit shelter trust (since the disclaimer of the residuary gift is likely to cause the property to pass to descendants, not to the surviving spouse); or

o The desired result can be obtained through a series of disclaimers by contingent remainder beneficiaries – see footnote 114; or

o The instrument specifically provides that a disclaimer by the trustee of the credit shelter trust causes the property to pass to the surviving spouse (or into a marital deduction trust).

Drafting Tip: When drafting new wills and trusts, specify where disclaimed property goes in the event of a trustee disclaimer.

Allofthetrustbeneficiariesaretreatedashavingdiedonlyforpurposesdeterminingthedispositionofaninterestinpropertydisclaimedbyatrusteethatotherwisewouldhavepassedintothetrust.Theyarenottreatedashavingdiedforotherpurposesoftheinstrument.113Therefore,ifthenextbeneficiaryprovidedunderthegoverninginstrumentalsowasabeneficiaryofthetrustsubjecttothedisclaimer,thatbeneficiaryisnottreatedashavingdiedforpurposesofthecontingentgift.

Forinstance,considerawillwithapecuniarygifttoacreditsheltertrustandtheresiduarygifttothesurvivingspouse.Ifthetrusteeofthecreditsheltertrustdisclaimedaninterestinproperty,thepropertywouldpasstothesurvivingspouseaspartoftheresiduaryestate,regardlessofthesurvivalofthetestamentarytrust’sremainderbeneficiaries.Thesurvivingspouseistreatedashavingdiedforpurposesofthecreditsheltertrustdisclaimerbutisnottreatedashavingdiedwithrespecttotheresiduarygift.

Thisprovidesausefulplanningtechniquefordecedentswithnontaxableestateswhodiewitholdtax‐plannedwills,butonlyifthecreditsheltergiftisthepre‐residuarygift.Inthesecases,itusuallyismorebeneficialforthepropertytobetaxableinthesurvivingspouse’sestate(becauseoftheadjustmenttobasisattheseconddeath)thanforthecreditsheltertrusttobeestablished(whichisnotneededforestatetaxsavingsandwhichprecludesbasisstep‐

113Tex.Prop.Code§240.053(d).


up).114

Ifthegifttothecreditsheltertrustisthepre‐residuarygiftandthegifttothesurvivingspouseortoaqualifiedterminableinterestproperty(“QTIP”)trustistheresiduarygift,adisclaimerbythetrusteeofthecreditsheltertrustwillcausethepropertytopasstothesurvivingspouseortotheQTIPtrust,eachofwhichqualifiesforbasisadjustmentatthedeathofthesurvivingspouse.

Thistechniqueisunlikelytoworkifthepre‐residuarygiftistothesurvivingspouseorQTIPtrustandtheresiduarygiftistothecreditsheltertrust.TheTexasDisclaimerActdoesnotpermit“upstream”disclaimers,only“downstream.”Inthiscase,ifthetrusteeofthecreditsheltertrustdisclaims,thepropertyislikelytopasstothedecedent’sdescendants,nottothesurvivingspouse.115Anupstreamdisclaimerispossibleifthewillortrustspecificallyprovidesforit.116

6. OtherTexasDisclaimerActissues

a. Effectofspendthriftprovisionandprovisionsininstrumentgrantingorlimitingdisclaimerpower

Whatifthegoverninginstrumentcontainsaspendthriftprovisionthatstatesthat“theinterestofabeneficiaryingiftedpropertymaynotbevoluntarilyorinvoluntarilytransferredbeforepaymentordeliveryoftheinteresttothebeneficiarybythetrustee”?117Isthebeneficiary’sdisclaimeraprohibited“transfer”forpurposesofthespendthriftprovision?TheTexasDisclaimerActcomprehensivelyanswers“no.”118Aspendthriftprovisionneverpreventsadisclaimerfrombeingeffective.

Ifagoverninginstrumentincludesaspecificrestrictionontherighttodisclaim,theanswerdependsonwhoisattemptingtodisclaim.Apersonotherthanafiduciarycanalwaysdisclaim,evenifthegoverninginstrumentpurportstoforbiddisclaimers.119Accordingly,therightofanindividualtodisclaimcannotbelimited.

114Foradiscussionofthissubject,seeMickeyDavis,BasisAdjustmentPlanning,38thAnnualAdvancedEstatePlanning&ProbateCourse(2014).115Iftheresiduarygiftistothecreditsheltertrustandtheentireresiduarygiftiscommunityproperty,itmaybepossibletocausethepropertytopasstothesurvivingspousethroughaseriesofdisclaimers.Ifthetrusteeofthecreditsheltertrustdisclaimsandallcontingenttakersunderthetermsoftheinstrument(usuallythiswillbeallofdecedent’slivingdescendants)disclaim,anintestacymaybecreated.UnderTex.Est.Code§201.003(b)(1),allofthecommunityestatepassesbyintestacytothesurvivingspouseifthereisnosurvivingdescendantofthedecedent.Thisapproachmaynotbeasfar‐fetchedasitsoundssinceaparentmaydisclaimforhisorherminorchildrenwithoutcourtapprovalinthissituation.115Tex.Prop.Code§240.008(e).116See“Anticipatingpossibledisclaimerswhendraftingestateplanningdocuments”inArticle4below.117SeeTex.Prop.Code§112.035.118Tex.Prop.Code§§240.006(b)(applyingtoapersonotherthanafiduciary),240.007(c)(applyingtoapersondesignatedtoserveorservingasafiduciary,astodisclaimerofapower),240.008(a)(1)(applyingtoafiduciaryactinginafiduciarycapacity,astodisclaimerofaninterestinorpoweroverproperty).119Tex.Prop.Code§240.006(b).


Practice Tip: Consider using the tax savings catch‐all if the desired disclaimer is not described by the Texas Disclaimer Act or when trying to fix after the fact a disclaimer which failed to meet the Act’s requirements.

Afiduciarydisclaimerisbarrediftheinstrumentcreatingthefiduciaryrelationshipexplicitlyprohibitsdisclaimers.120Afiduciaryactinginafiduciarycapacitymaynonethelessdisclaimifaninstrumentotherthantheinstrumentcreatingthefiduciaryrelationshipprohibitsdisclaimers.121Notethattheinstrumentcreatingthefiduciaryrelationshipwillgenerallybetheinstrumentcreatingthedisclaimedinterestorpoweronlyinthecaseofatrust.Inthecaseofaguardianship,theinstrumentcreatingthefiduciaryrelationshipisacourtorder.Eveniftheinstrumentprovidingforagiftofpropertytothewardprohibiteddisclaimers,theguardianwouldnotbeboundbythatprovision,asthegiftinstrumentwouldbe“aninstrumentotherthantheinstrumentthatcreatedthefiduciaryrelationship”andaccordinglycouldnotbaradisclaimer.122Similarly,propertypassingtoanestateoraprincipalpursuanttoanotherindividual’sgiftcouldbedisclaimedbytheexecutororagent,respectively,eveniftheinstrumentprovidingforthegiftprohibiteddisclaimers(althoughthedisclaimerwouldbebarredbyaprovisioninthewillorpowerofattorneystatingthatthefiduciarycouldnotdisclaimonbehalfoftheestateorprincipal).

Incontrast,atrusteeisboundbythetermsoftheinstrumentcreatingthefiduciaryrelationship,whichinmostcasesisalsotheinstrumentcreatinganinterestorpower.Forexample,apersonwhoisdesignatedasthetrusteeofatestamentarytrust,governedbyawillthatprohibitsfiduciarydisclaimers,eithermustaccepttheappointmentastrusteewithallpowersgrantedunderthewillormustdeclinetoserveastrustee.123Therecanbenodisclaimerofunwantedpowersifthewillprohibitsdisclaimers.Similarly,afteracceptingtheappointmentastrustee,thetrusteecannotdisclaimanyinterestinpropertypassingtothetrustbecauseofthewill’sprohibitiononfiduciarydisclaimers.124

b. Taxsavingscatch‐all

AlthoughitisnotnecessarytocomplywithSection2518oftheInternalRevenueCodeinorderforadisclaimertobeeffectiveundertheTexasDisclaimerAct,theactincludesasafeharborfordisclaimersthatarequalifiedforfederaltaxpurposes.Specifically,Section240.057providesthatifadisclaimedinterestistreatedundertheInternalRevenueCodeasneverhavingbeentransferredtothedisclaimant,thedisclaimeriseffectiveasadisclaimerundertheTexasDisclaimerAct.125Underthisprovision,adisclaimantthatisfocusedonmakingaqualified

120Tex.Prop.Code§§240.007(a)(persondesignatedtoserveorservingasafiduciary),240.008(a)(fiduciaryactinginfiduciarycapacity).121Tex.Prop.Code§240.008(a)(2).122SeeTex.Prop.Code§240.008(a)(2).123SeeTex.Prop.Code§240.007(a).124SeeTex.Prop.Code§240.008(a).125Tex.Prop.Code§240.057.


Practice Tip: Consider warning an heir or beneficiary that the fiduciary is about to distribute real property in order to give him or her the chance to disclaim before the deed is executed and recorded.

disclaimerforfederaltaxpurposescanfollowtheguidanceunderSection2518andthedevelopedcaselawinordertocomplywithfederallawandbeassuredthatthedisclaimerwillbeeffectiveforstatelawpurposesaswell.NotethattheTexasDisclaimerActdoesnotrequirecompliancewithSection2518;rather,Section240.057isapermissiveprovisionthatprovidesanalternativemethodofexecutinganeffectivedisclaimer.

WithSection240.057,thepossibilitynolongerexiststhatadisclaimerwhichotherwisewouldqualifyfortaxpurposesfailstoqualifybecauseitisnotsupportedbyTexaslaw.UnderpriorTexaslaw,thereweresomedisclaimersthatwerepossibleunderstatelawwhichdidnotqualifyfortaxpurposes,andthereweresomedisclaimerswhichwerepossibleundertaxlaw,butonlyifstatelawpermitted,andTexaslawdid

notpermitthem.Nowalltax‐qualifieddisclaimersarepermittedunderTexaslaw,andthereareadditionaldisclaimerspermittedunderTexaslawwhicharenotqualifiedfortaxpurposes.126

c. Dofiduciarieshaveliabilityfordistributingpropertybeforeadisclaimer?

Considertheefficientpersonalrepresentativeortrusteewhocompletestheadministrationoftheestateortrustanddistributesthepropertytothenamedbeneficiaries.Whatliabilitydoesthatfiduciaryhaveifabeneficiarylaterwishestodisclaim?Mustthefiduciarywaitacertainperiodoftimebeforedistributingproperty?Ifso,howlong?

Theresponsibilityfordisclaiminganinterestinanestateortrustfallsontheheirorbeneficiary,notonthepersonalrepresentative.Evenifthefiduciarydistributestheproperty,theheirorbeneficiarydoesnothavetoacceptit.Still,sinceapersonalrepresentativeortrusteemayhavethedutytodisclosematerialinformationknown

126TheprincipalreasonthatsomedisclaimerspermittedundertheTexasDisclaimerActfailwillnotqualifyfortaxpurposesisthatthereisnotimelimitunderTexaslaw,whilethenine‐monthtimelimitstillappliesfortaxlawpurposes.


tothemthatmightaffectabeneficiary’srights,127itmaybeprudenttowarnthebeneficiarythatthedistributionisgoingtooccur.Thisisparticularlytruewithdistributionsofrealestate.Whileitisrelativelyeasyforanheirorbeneficiarytorefusetoacceptacheck(bynotcashingit)ortangiblepersonalproperty(byrefusingdelivery),recordingadeedcreatesapresumptionthatthedeedhasbeendeliveredandthatthegranteehasacceptedadeed.128Bysendingtheheirorbeneficiaryaletterstatingthatthepersonalrepresentativeortrusteeisabouttodistributetherealproperty,thepersonalrepresentativegivesthebeneficiaryachancetoavoidthecreationofthispresumptionbydeliveringthedisclaimerpriortoexecutionandrecordingofthedeed.

d. Arenon‐statutorydisclaimerspermitted?

PriortotheenactmentofTexas’sfirstdisclaimerstatutein1971,commonlawdisclaimerswerepermitted.129The1971statuteprovidedthat“[f]ailuretocomplywiththeprovisionshereofshallrendersuchdisclaimerineffectiveexceptasanassignmentofsuchpropertytothosewhowouldhavereceivedsamehadthepersonattemptingthedisclaimerdiedpriortothedecedent.”130UntiltheenactmentoftheTexasDisclaimerAct,thisbasiclanguagehadremainedapartofTexas’sdisclaimerstatutesandmostrecentlyappearedinSection122.102oftheEstatesCode.Ifbystatuteadisclaimerwas“ineffectiveexceptasanassignment,”commonlawdisclaimerswerebarred.

HB2428repealsSection122.102.ItamendsSection122.201oftheEstatesCodetoprovidethat“apersonwhoisentitledtoreceiveproperty…anddoesnotdisclaimthepropertyunderChapter240,PropertyCode,mayassigntheproperty…toanyperson.”Thisisnotthesamethingassayingthatadisclaimernotincompliancewiththestatuteisanassignment.

TheTexasDisclaimerActdoesnothaveaprovisionsimilartotherepealedSection122.102.Instead,Section240.003statesthatChapter240ofthePropertyCode“appliestodisclaimersofanyinterestinorpoweroverproperty,whenevercreated,andSection240.004statesthat,unlessdisplacedbyaprovisionofChapter240,theprinciplesoflawandequitysupplementthechapterandthatthechapter“doesnotlimitanyrightofapersontowaive,release,disclaim,orrenounceaninterestinorpoweroverpropertyunderastatute[notlaw]otherthanthischapter.”(Emphasisandbracketedlanguageadded.)

ProfessorAdamHirschoftheUniversityofSanDiegoSchoolofLawhascommentedonthispartoftheuniformact.Hebelievesthat,unlessastatechangestheuniform

127Montgomeryv.Kennedy,669S.W.2d309,313(Tex.1984).128PanhandleBaptistFoundation,Inc.v.Clodfelter,54S.W.3d66,71‐72(Tex.App.Amarillo2001).Thepresumptionofdeliveryandacceptancemayberebuttedbycontraryevidence.54S.W.3dat72.129SeeFirstCityNat’lBankofHoustonv.Toombs,431S.W.2d404,406(Tex.Civ.App.‐SanAntonio1968,writref’dn.r.e.)130Tex.Prob.Code§37A(1971)(thirdsentence).


Practice Tip: Even though there is no state law time limit on disclaimers, don’t forget that the nine‐month deadline remains relevant for tax‐motivated disclaimers. Best practice is to disclaim before the tax deadline passes even if the disclaimant is unlikely to have a taxable estate.

act,theprovisionthattheactdoesnotlimitanyrightofapersontodisclaimundera“law”otherthantheactpermitscommonlawdisclaimers.Hethinksthisisproblematic,131andheurgedREPTLtoaddressit.

TheTexasDisclaimerActaddressestheissuebychangingtheword“law”to“statute”inSection240.004(b)ofthePropertyCode.Theactdoesnotlimitdisclaimerrightsarisingunderanotherstatute.Doesthismeanthatitlimitsdisclaimerrightsundercommonlaw?TheActdoesnotsaythatcommonlawdisclaimersarebarred.Acourtislikelytointerpretthenewacttomeanthatnon‐statutorydisclaimersarebarred.Still,thereisatinycrackthroughwhichsomeonemayattempttosqueezetoassertacommonlawrighttodisclaim.BecauseofthebreadthoftheTexasDisclaimerActandbecauseiteliminatesthenine‐monthdeadlinefordisclaimers,itishardtoimagineacaseinwhichsomeonewouldintentionallytrytomakeacommonlawdisclaimer.Iftheissuearisesatall(whichisunlikely),itprobablywillariseinanattempttocureaproblemwithadisclaimerthatfailedtomeettherequirementsoftheTexasDisclaimerAct,suchasafailuretodeliverthedisclaimertotheproperpersonbeforefilingapetitioninbankruptcy.

3. Federalissues

Ifadisclaimerincludesmakingsurethedisclaimantisnottreatedashavingeverreceivedthedisclaimedpropertyforfederaltaxlawpurposes,therequirementsofIRC§2518willstillneedtobemet.Forexample,thedisclaimermustbemadewithinSection2518’snine‐monthrulerequirements.Asnotedabove,atax‐motivateddisclaimermadepursuanttoSection2518wouldstillbeavaliddisclaimerforTexaslawpurposes.132IfthedisclaimerdoesnotmeettherequirementsofSection2518,thedisclaimantwillbedeemedtohavemadeatransferforgifttaxpurposes(recalldonativeintentnotrequired),perhapsrequiringthefilingofagifttaxreturnandeventriggeringgifttaxliability.

A. Federaltaxliens

InDryev.UnitedStates,133theSupremeCourtheldthatadisclaimerbythedecedent’sstatutoryheircouldnotdefeatafederaltaxlienontheheir’spropertyasamatteroffederallaw.Inthatcase,thedecedent’sinsolventheirowedunpaidincometaxesatthetimeofthedecedent’sdeath.Theheirdisclaimedafterthedecedent’sdeath,resultinginthepropertypassingunderstatelawtothedisclaimant’schild.131SeeAdamJ.Hirsch,TheCodeBreakers:HowStatesareModifyingtheUniformDisclaimerofPropertyInterestsAct,46RealProperty,TrustandEstateLawJournal325,331(2011).132Tex.Prop.Code§240.057.133528U.S.49(1999).


Inreachingitsdecision,theSupremeCourtfocusedonthestatutorytaxlienstatute,IRC§6321–thelienattachestothetaxpayer’s“propertyandrightstoproperty.”Thus,thelienattachedtothedisclaimant’sinterestinthedecedent’sestateatthetimeofthedecedent’sdeath(notwithstandingstate‐lawrelationbacktheory).

B. Disclaimant’sbankruptcy

WhilelackingadefinitiveSupremeCourtdecisionorstatuteonpoint,mostfederalcourtshavefocusedonwhetherthedisclaimerwas“pre‐”or“post‐”petition.Ifthedisclaimertookplacepriortofilingforbankruptcy,statelawapplies,andthedisclaimeriseffective.Ifthedisclaimantisalreadyinbankruptcy,federallawapplies,andthedisclaimerisineffective.RelevantTexascasesfollowtheserules.134

C. ERISAbeneficiaries

ERISAstatesthatitsprovisionssupercedeallstatelawsastheymayrelatetoanyemployeebenefitplan.135TheFifthCircuithasheldthatadisclaimerconsistentwithstatelawguidelineswasnoteffectiveasadisclaimerofpensionbenefits,becauseitdidnotcomplywiththeplan’sprescribedmethodofdisclaimer.136

Whilenotexactlyonpoint,inKennedyv.PlanAdministrator,theSupremeCourthasheldthatawaiverbytheparticipant’sspouseduringadivorceproceedingwasnoteffectivesinceitdidnotmeettheexecutionrequirementsoftheplan’s“disclaimer”provisions.137

D. Medicaideligibility

InaddressingMedicaideligibility,federallawdefinesasaresourceanypropertytheindividualisentitledtobutdoesnotreceivebecauseofactiontakenbytheindividual.138Thatlanguagehasbeeninterpretedtocauseadisclaimertobetreatedasifthepropertyhadbeenreceivedbythedisclaimantandthentransferredbythedisclaimantforlong‐termcareMedicaideligibility.139

Whilestateshavetheauthoritytodeveloptheirowneligibilityrequirementsunder42U.S.C.1396(a)(1),thestatesarerequiredtofollowcertainfederalmandates.140Thus,underTexasandfederallaw,disclaimersaregenerallytreatedastransfers.141

134SeeMatterofSimpson,36F.3d.450(5thCir.1999)andInreSchmidt,362B.R.318(Bankr.W.D.Tex2007).13529U.S.C.§1144(a)2012.136SeeNickelv.EstateofEstes,12F.3d294(5thCir.1997).137SeeKennedyv.PlanAdministrator,555U.S.285(2009).13842U.S.C.§1396p(h)(1).139SeeH.ClydeFarrellandBlissBurdettePak,EstatePlanningforBeneficiariesWhoMayNeedLongTermCare,”2014StanleyM.JohansonEstatePlanningWorkshop(UT‐CLE,2014).140See42U.S.C.1396p(c).141SeeMedicaidforElderlyandPeoplewithDisabilitiesHandbook§E03372.


However,intheirexcellentarticle,FarrellandPakdiscussthepossibilitythatadisclaimermaynotbetreatedasatransferifMedicaidisavailableasaresultofSSIeligibility.Theyreferto42U.S.C.§1382b(c)(1)(A)(i)andapaperbyRebaCollins,QuestionsRegardingTrustsandOtherSSIIssues,”presentedattheUniversityofTexasSchoolofLawSpecialNeedsTrustsConference2011.

4. Draftingopportunities

TheTexasDisclaimerActoffersestateplanningattorneysdraftingopportunitiesinfourareas:(a)Draftingestateplanningdocumentsinanticipationofpossibledisclaimers;(b)draftingdisclaimersthemselves;(c)draftingnoticesandwaiversforusebytrusteeswishingtodisclaim;and(d)draftingpleadingsandrelateddocumentsseekingcourtapprovaloffiduciarydisclaimers.

A. Anticipatingpossibledisclaimerswhendraftingestateplanningdocuments

TheTexasDisclaimerActprovidesthattheinstrumentcreatingtheinteresttobedisclaimedmaystatewherethedisclaimedinterestgoes.142Thisgivesplannerstheopportunitytocreatecertaintyandinsomecasesachievecreativeresults.

1. Disclaimerintothecreditsheltertrust.

Whenanestateplanutilizesacreditsheltertrust,plannersoftenhaveprovidedthat,ifthesurvivingspousedisclaimspropertywhichotherwisewouldpassoutrighttoasurvivingspouse,thepropertyinsteadpassesintothecreditsheltertrust.143

ThistechniqueworkedundertheformerTexaslawanditworksundertheTexasDisclaimerAct.Itmaybeusedtosupplementaformula‐fundedtrustbyprovidingawaytogetassetsnotsubjecttotheformulaprovisionintothecreditsheltertrust.Italsomaybeusedastheonlywaytogetassetsintothecreditsheltertrust(a“disclaimertrust”),permittingthesurvivingspousetodecidewhetherornottoincludeestatetaxplanningorassetprotectionafterhisorherspouse’sdeath.Italsomaybeusedinlifeinsuranceandretirementplanbeneficiarydesignationstogivethesurvivingspousetheoptionofmovingalloraportionofthebenefitstothecreditsheltertrustifcircumstanceswarrant.

Caremustbetakentoassurethatthesurvivingspouseisgivennospecialpowerofappointmentoverthedisclaimedproperty.144Thecreditsheltertrustshouldincludeasavingsprovisionnegatingthepowerofappointmentoverdisclaimedproperty.Thecreditsheltertrustalsoshouldincludeaprovisionpermittingthetrusteetosegregatethedisclaimedpropertyinaseparatetrustorsharesothatthepropertygoinginto

142Tex.Prop.Code§240.051(d);Tex.Prop.Code§240.053(b).143InternalRevenueCode§2518(b)(4)(A).Treas.Reg.§25.2518‐2(e)(2).144Treas.Reg.§25.2518‐2(e)(2).


thetrustbymeansotherthanadisclaimerstillmaybesubjecttoaspecialpowerofappointment.

2. Disclaimeroutofthecreditsheltertrust

Asmentionedabove,145itmaybebeneficialtopermitthetrusteeofthecreditsheltertrusttodisclaimpropertythatotherwisewouldpassintothecreditsheltertrusttoinsteadpassinawaywhichqualifiesforthemaritaldeduction(whetheroutrighttothesurvivingspouseortoaQTIPtrust).Thispermitsthetrusteetomakeaneducatedguessatthetimeofthefirstspouse’sdeathwhetherestatetaxsavingsorbasisadjustmentonthedeathofthesurvivingspouseismorelikelytobebeneficial.

Ifthepre‐residuarygiftistothecreditsheltertrustandtheresiduarygiftqualifiesforthemaritaldeduction,thenitprobablyisunnecessarytoincludeaprovisionspecifyingwherepropertygoesifthetrusteeofthecreditsheltertrustdisclaims.Evenso,itisbeneficialtoincludeaspecificprovisionineverycredit‐shelterformulawillortrustfortworeasons:(a)Itisagoodideatohaveaboilerplateprovisiononthispointsothatthedrafterwillnotforgettoincludeitwhenthemaritaldeductiongiftisthepre‐residuarygift;and(b)itmayhelpthetrusteeavoidliabilityforbreachoffiduciarydutyformakingthedisclaimersinceitisanindicationthatthetestatororsettloranticipatedthissituationandconsideredatrusteedisclaimertobeanappropriateactioninsomecases.146

Ifthegifttothecreditsheltertrustistheresiduarygift,thenaprovisiondirectingthedisclaimedproperty“upstream”tothespouseoutrightortoaQTIPtrustmustbeincluded.ThedefaultruleoftheTexasDisclaimerActdoesnotprovideforupstreamdisclaimers.

3. Goingcrazywithspecificprovisions:Directingdisclaimersintoandoutofvarioustrusts

Plannersshouldconsiderincludingtrust‐specificprovisionsforeachtrustintheinstrumentdirectingthedisclaimedpropertytothedesireddestination.Thismayseemextreme,butitisatoolthattheTexasDisclaimerActgivesestateplannersanditisonetoconsiderusing.Hereareexamples:

AdisclaimerbythetrusteeofcreditsheltertrustcausespropertytopassintotheQTIPtrust,andadisclaimerbythetrusteeoftheQTIPtrustcausespropertytopassintothecreditsheltertrust.

145See“Wheredoesthedisclaimedpropertygo?”andtherelatedpracticetipinArticle2above.146Inadditiontospecificallydirectingthedisclaimedpropertytothemaritaldeductiongift,itmaybeagoodideatoincludeastatementofthetestator’sorsettlor’sintentionthatthetrusteemayconsidermakingadisclaimerandisexoneratedfromliabilitysolongasheorsheactsingoodfaithandisnotgrosslynegligent.See“Exculpatingthetrusteeformakingdisclaimers”inthisarticlebelow.


AcombinationdisclaimerbythetrusteeofthecreditsheltertrustandthetrusteeoftheQTIPtrustcausesthepropertytopasstothesurvivingspouse,outrightandfreeoftrust.

AdisclaimerbythetrusteeofaGSTexempttrustcausesthepropertytopassintoanon‐GSTexempttrust.

Adisclaimerbyatrusteecausesthepropertytopassintoaspecialneedstrust.

AdisclaimerbythetrusteecausesthepropertytopassintoaqualifiedsubchapterStrustoranelectingsmallbusinesstrust.

Adisclaimerbythetrusteecausesretirementplanbenefitstopassintoaconduittrust.

4. Draftingtopermitaspecialtrusteetomakedisclaimers

Ifafamilymemberisthetrusteeofatrust,thattrusteemaybeforcedtoseekcourtapprovalofadisclaimer(ratherthanusingthenoticeprovisions)becauseaninterestinorpoweroverpropertyislikelytopasstothatpersonasaresultofthedisclaimer.147Forexample,ifthesurvivingspouseisthetrusteeofthecreditsheltertrust,andthetrusteewishestodisclaimsothatthepropertypassestothespouseoutrightorintoaQTIPtrust,thesurvivingspousecannotusethenoticeprovisionstoavoidgoingtocourt.ThesameresultoccursifadescendantofthetestatoristhetrusteeandthedisclaimercausespropertytopassintoaQTIPtrustofwhichthedescendantisaremainderbeneficiary.148

Thesettlorortestatormayavoidthisresultbyusinganon‐familymemberastrustee.However,thatmaybeundesirableforotherreasons.

Theestateplannercansolvethisproblembyincludingaprovisionappointingaspecialtrusteewhosesoleauthorityistomakeadisclaimeronbehalfofthetrust.Ifthespecialtrusteeisadisinterestedperson,thiswouldpermitadisclaimerwithoutcourtapproval(byfollowingthenoticeprovisions)whilepermittingafamilymembertoserveastrustee.Thisalsomaybeagoodideaifacorporatetrusteeisused,sincethecorporatetrusteemaybetooconservativetomakeadisclaimerwithoutcourtapproval.

Whenusingthisapproach,considerthefollowing:

Asspecialtrustee,thedisinterestedpersonissubjecttofiduciaryduties.Ifthetrusteedisclaimswithoutcourtapproval,thedisclaimermustbecompatible

147Tex.Prop.Code§240.008(c)(4).148Ontheotherhand,thedescendant/trusteeofacreditsheltertrustcoulddisclaimusingthenoticeprovisionstoavoidtheneedforcourtapprovalifthedisclaimerresultsinthepropertypassingoutrighttothesurvivingspouse.


withhisorherfiduciaryobligations.149Heorshemaybeexculpated,butonlytotheextentpermittedbytheTrustCode.150

Thedisinterestedpartygiventhepowertodisclaimmustbea“trustee.”Heorshecannotbecalleda“trustprotector”or“advisor.”Section240.008(d)ofthePropertyCodepermitsatrusteetodisclaim;itdoesnotpermitsomeoneotherthanatrusteetodisclaimonbehalfofatrust.

Mayafamilymemberwhocouldbenefitfromthedisclaimerbegiventhepowertoappointthespecialtrustee?Theauthorscanthinkofnoreasonthiswouldnotwork,althoughitwouldbemoreconservativetohaveadifferentmethodofselectingthespecialtrustee.Disclaimerswhicharepartofapre‐arrangedplanmaybeattackedbytheInternalRevenueService.151

5. Exculpatingthetrusteeformakingdisclaimers

Toovercomethereluctanceofatrusteetodisclaim,thesettlormaywishtoexculpatethetrusteefromliabilityformakingadisclaimer.Thisshouldbedoneonlyinappropriatecasesandshouldnotbeaboilerplateprovision.Also,atrusteecannotbeexculpatedforbreachesoffiduciarydutywhicharecommittedinbadfaith,intentionallyorwithrecklessindifference,normaythetrusteebeexculpatedforanyprofitderivedbythetrusteefromabreachoftrust.152

6. Prohibitingtrusteedisclaimers

Perhapsallofthistrusteedisclaimerbusinessistoomuchforthesettlor(ortheplanner)tohandle.Theinstrumentcreatingthetrustmayexpresslyprohibittrusteedisclaimers.153

Theprohibitionofadisclaimermustbeincludedintheinstrumentcreatingthefiduciaryrelationship.Itcannotbeincludedintheinstrumentmakingthegiftunlessthatsameinstrumentcreatesthefiduciaryrelationship.154Forexample,ifthewillmakesagifttothetrusteeofatestamentarytrustestablishedunderthatwill,thetestatormayprohibitthetrusteefromdisclaiming.However,ifthewillmakesapour‐overgifttoalivingtrust,thetestatorcannotprohibitadisclaimerbythetrusteebyincludingaprovisioninthewillsincethewilldidnotcreatethefiduciaryrelationship.Toprohibitatrusteedisclaimerofapour‐overgifttoalivingtrust,the

149Tex.Prop.Code§240.008(f).Thissubsectionalsoprovidesthatatrusteedisclaimerisnotapersebreachoffiduciaryobligations.150Tex.TrustCode§114.007(a).Seealso“Exculpatingthetrusteeformakingdisclaimers”below.151SeeSteveAkers,“PostMortemPlanning–It’sNotTooLatetoPlan:AReviewofIncome,GiftandEstateTaxPlanningIssuesandStrategies,”(July2015)(seethediscussionofEstateofMonroev.Commissioner,124F.3d699(5thCir.1997)onpage113).152Tex.TrustCode§114.007(a).153Tex.Prop.Code§240.008(a).154Tex.Prop.Code§240.008(a).See“Effectofspendthriftprovisionandprovisionsininstrumentgrantingorlimitingdisclaimerpower”inArticle2above.


trustinstrument,notthewill,mustincludetheprovisionprohibitingadisclaimersincethetrustinstrumentcreatesthefiduciaryrelationship.

7. Usingadisclaimertomakeadefined‐valuegiftortodeferthedecisiontopaygifttaxorestatetax

SincetheTexasDisclaimerActpermitsthetransferortostateintheinstrumentcreatingtheinteresttobedisclaimedwheretheinterestgoesifitisdisclaimed,155adonorcouldincludeaprovisioninthegiftinstrumentthatprovidesforthepropertytoreturntothedonorifthedoneedisclaims.Thismakesitpossibleforthedonortogivepropertywhichmaybefinallydeterminedforgifttaxpurposestobeworthmorethantheavailableremainingexemptionamountandthenrelyonthedoneetomakeaformuladisclaimeroftheexcess.156Thisisanalternativetoincludingthedefined‐valueclauseinthegiftinstrumentitself.Inahappymarriagesituation,amoreconservativeapproachtoachieveclosetothesameresultwouldbeforthegiftinstrumenttoprovidethat,intheeventofadisclaimerbythedonee,thedisclaimedpropertywouldpassintoaintervivosQTIPtrustforthespouseofthedonor.Inthisway,theargumentthatthedonorsomehowretainedaninterestbydirectingthedisclaimedpropertytohimselforherselfisavoided.

Thistechniquecanbetakenastepfurther.AssumethatthedonorfearsthattheInternalRevenueServicewillannouncenewSection2704regulationswithinthenextninemonthsandthatthoseregulations(1)willapplytotransfersafterthedatetheregulationsareannouncedand(2)willeliminateorreducediscountingontheestatetaxreturnforlackofmarketabilityandlackofcontrol.Thedonormaygiveamuchlargergifttothedonee–largeenoughthatthedonoriscertaintoincurgifttaxifnodisclaimerismade–andprovideinthegiftinstrumentthatdisclaimedpropertypassesbacktothedonororintoaQTIPtrustforthedonor’sspouse.Fortheninemonthsfollowingthegift,thedoneeshouldhavetheoptiontochoosebetweenexposingtheportionofthegiftedpropertyinexcessoftheexemptionamounttogifttaxationortoestatetaxation:

Iftheregulationsareissuedduringthenine‐monthperiodandtheydoindeedseverelylimitdiscountsavailableonthedonor’sestatetaxreturn,thedoneecandonothingandcauseagifttaxtobeincurredandpaidonthediscountedvalueofthegift.

Iftheregulationsarenotissuedduringthenine‐monthperiod,orifduringthenine‐monthperioditbeginstoseemlikelythattheestatetaxwillberepealed,thedoneecandisclaim,causingpartorallofthepropertytobeincludibleinthedonor’s(orthedonor’sspouse’s)estateforestatetaxpurposes.

155Tex.Prop.Code§240.051(d).156SteveAkers,“TransferPlanning,IncludingUseofGRATs,InstallmentSalestoGrantorTrusts,andDefinedValueClausestoLimitGiftExposure,”32ndAnnualAdvancedEstatePlanningandProbateCourse(2008).Manypractitionershavegrowncomfortableputtingthedefined‐valueclauseinthegiftinstrumentitselfsinceWandryv.Commissioner,T.C.Memo2012‐88(2012).


CouldtheInternalRevenueServiceattackthisasapre‐arrangedplaninamannersimilartoitsattackinEstateofMonroev.Commissioner?157Itishardtoseesuchanattackprevailingsolongasthefactsdonotshowcollusion.Personsoftenmakedecisionstodisclaimornottodisclaimfortaxreasons,sothemerefactthatthedonee’sdecisionisintendedtosavetaxesshouldnotmakeitapre‐arrangedplan.Also,whilethedoneemayexpecttoreceivethepropertyinquestionatthedonor’sdeath,thisresultisnotassured.Thedonorcouldchangehisorhermindorcouldhavecreditorproblems.Thereiseconomicsubstancetothedonee’sdecisiontodisclaimorrefrainfromdisclaiming.

Notethat,whiletheTexasDisclaimerActdoesnotplaceatimelimitondisclaimers,thedisclaimersdiscussedinthissectionmustbecompletedwithinninemonthsofthetransferbecauseofthenine‐monthlimitforgifttaxpurposes.

B. DraftingdisclaimersundertheTexasDisclaimerAct

DraftingdisclaimersundertheTexasDisclaimerActisprettystraightforward.Theactsetstherequirementsforeachtypeofproperty.AttachedasAppendix2areannotatedexamplesofdisclaimers.TheseformsareavailableinpdfandWordformatsattexasprobate.com.

C. Usingthenoticeprovisionsfortrusteedisclaimers

Thetrusteeofanon‐court‐createdtrustmaydisclaimpropertywithoutcourtapprovalsolongas(a)thetrusteeinhisorherindividualcapacitydoesnotreceivethepropertyoraninterestinthepropertyasaresultofthedisclaimerand(b)thebeneficiariesarenotifiedinthemannerprescribedinSection240.0081ofthePropertyCode.158

Thenoticeprovisionsarebasedonthoseusedinthedecantingstatutes.159AnexampleofanoticeformisincludedinAppendix2.Abeneficiarymaywaivetherighttoreceiveanotice.AnexampleofawaiverformisincludedinAppendix2.

1. Whoisentitledtonotice?

Todisclaimwithoutcourtapproval,thetrusteemustgivenoticetoallofthecurrentbeneficiariesandpresumptiveremainderbeneficiariesofthetrust.160Forpurposesofdeterminingwhoisacurrentbeneficiaryorapresumptiveremainderbeneficiaryentitledtonotice,abeneficiaryisdeterminedasofthedatethenoticeissent.161

157124F.3d699(5thCir.1997).TheIRSattackbasedonapre‐arrangedplanwassuccessfulintheTaxCourt,buttheFifthCircuitoverturnedtheTaxCourt.158Tex.Prop.Code§240.008.159SeeTex.TrustCode§§111.071and111.074.160Tex.Prop.Code§240.0081(a).161Tex.Prop.Code§240.0081(b).


a. Currentbeneficiary

A“currentbeneficiary,”withrespecttoaparticulardate,meansapersonwhoisreceivingoriseligibletoreceiveadistributionofincomeorprincipalfromatrustonthatdate.162Ifthetrustpermitsthetrusteetospraydistributionsamongaprimarybeneficiaryandhisorherdescendants,allarecurrentbeneficiariesentitledtonotice.

b. Presumptiveremainderbeneficiary

A“presumptiveremainderbeneficiary,”withrespecttoaparticulardate,meansabeneficiaryofatrustonthatdatewho,intheabsenceofnoticetothetrusteeoftheexerciseofthepowerofappointmentandassumingthatanyotherpowersofappointmentunderthetrustarenotexercised,wouldbeeligibletoreceiveadistributionfromthetrustifthetrustterminatedonthatdateortheinterestsofallbeneficiariescurrentlyeligibletoreceiveincomeorprincipalfromthetrustendedonthatdatewithoutcausingthetrusttoterminate.163

Whilethisdefinitionsayswhoapresumptiveremainderbeneficiaryisintheabsenceofnoticeoftheexerciseofapowerofappointment,itdoesnotsaywhothepresumptiveremainderbeneficiaryisifthetrusteeisnotifiedthatapowerofappointmenthasbeenexercised.Forexample,assumethattheonlycurrentbeneficiaryhasabroadspecialtestamentarypowerofappointmentoverthetrustpropertyandthattheremainderbeneficiariesindefaultofexerciseofthepowerarethecurrentbeneficiary’stwoadultchildren:

Ifthetrusteeisnotnotifiedoftheexerciseofthepowerofappointment,thetwoadultchildrenarepresumptiveremainderbeneficiariesandareentitledtonotice.

Ifthebeneficiarysendsthetrusteeacopyofhisorherwillexercisingthepowerinfavorofhisaccountant,whoarethepresumptiveremainderbeneficiariesentitledtonotice?

o Istheaccountanttheonlypresumptiveremainderbeneficiary?

o Arethecurrentbeneficiary’schildrentheonlypresumptiveremainderbeneficiaries?

Unlessthetrusteeisnotifiedofanirrevocableexerciseofapowerofappointment,thesafestcourseistotreattheappointeeofarevocableexerciseofapowerofappointmentandthepersonswhowouldbepresumptiveremainderbeneficiarieshadthepowernotbeenexercisedallaspresumptiveremainderbeneficiariesentitledtonotice.

162Tex.Prop.Code§240.002(1).TheTexasDisclaimerActusesthesamedefinitionthatthedecantingstatutesuse,whichisfoundinTex.TrustCode§112.071(3).163Tex.Prop.Code§240.002(1).TheTexasDisclaimerActusesthesamedefinitionthatthedecantingstatutesuse,whichisfoundinTex.TrustCode§112.071(7).


c. Noticetominororincapacitatedbeneficiaries

Ifaminororincapacitatedbeneficiaryhasacourt‐appointedguardianorconservator,thenoticemustbegiventotheguardianorconservator.Ifaminorbeneficiaryhasnocourt‐appointedguardianorconservator,thenoticemustbegiventoaparentoftheminor.164

d. Noticetotheattorneygeneral

Noticetotheattorneygeneralisrequiredifacharityisentitledtonotice,acharityentitledtonoticeinnolongerinexistence,thetrusteehastheauthoritytodistributetrustassetstooneormorecharitiesthatarenotnamedintheinstrument,orthetrusteehastheauthoritytomakedistributionsforacharitablepurposebutnocharityisnamedasabeneficiaryforthatpurpose.165Noticetotheattorneygeneralisnotrequiredmerelybecauseacharityisapermissibleappointeeofapowerofappointmentheldinanon‐fiduciarycapacityormerelybecauseacharityisaremotecontingentbeneficiary.166

e. Waiverandotherexceptionstothenoticerequirement

Section240.0081(e)providesthatthetrusteeisnotrequiredtoprovidethenoticetoabeneficiarywho:

(1)isknowntothetrusteeandcannotbelocatedbythetrusteeafterreasonablediligence;

(2)isnotknowntothetrustee;

(3)waivesthenoticerequirement;or

(4)isadescendantofabeneficiarytowhomthetrusteehasgivennoticeifthebeneficiaryandthebeneficiary’sancestorhavesimilarinterestsinthetrustandnoapparentconflictofinterestexistsbetweenthem.

AformofwaiverofnoticeisinAppendix2.

BecauseofthewaySection240.0081(e)(4)isworded,inordertotakeadvantageofitsvirtualrepresentationexception,anoticemustbegiventotheancestorvirtuallyrepresentinghisorherdescendants;awaiverbytheancestorisinsufficient.Theexceptiononlyworksforanancestor“towhomthetrusteehasgivennotice;”ifthatancestorwaivesthenotice,thetrusteehasnotgivenhimorhernotice,soSubsection(e)(4)isnotinvoked.Eventhoughanoticetoaminorchildwithnoguardianorconservatormustbegiventothechild’sparentunderSubsection(d),thatparentisnotauthorizedtowaivethenotice,sinceSubsection(e)forgivesgivingnoticetoa

164Tex.Prop.Code§240.0081(d).165Tex.Prop.Code§240.0081(c).166Tex.Prop.Code§§240.002(1)and240.0081(a)and(c).


“beneficiary”whowaivesnotice,nottoaparentwhoreceivesthenoticeontheminor’sbehalf.167

Similarly,theattorneygeneralprobablyisnotabletowaivenoticesincetheattorneygeneralisnotabeneficiaryforpurposesofSection240.0081(e).

Thetrusteehasadutytodisclosematerialfactsknowntothetrusteethatmightaffectbeneficiaries’rights.168Whilethescopeofthisdutyissubjecttodebate,adisclaimerislikelytobeconsideredamaterialfactthatthetrusteemustdisclose.Therefore,thetrusteeshoulddisclosetheunderlyingfactsandthereasonformakingthedisclaimer.Thisdisclosurecouldbeincludedinthewaiverformitself,butitmaybebettertokeepthewaiversimpleandmakethedisclosureinoneormoreseparatedocuments.Thewaivershouldincludeanacknowledgementofreceiptofthedisclosurebythebeneficiary.

Thedraftershoulduseextremecautionaboutincludingareleaseinthewaiver.Thetrusteeoftenwantsabeneficiary’sreleasetobesupportedbyconsiderationinordertoassureitseffectiveness.169Oftentheconsiderationforabeneficiaryreleaseistoinducethetrusteenottoincurtheexpenseofajudicialproceedingtoapprovethetrustee’saction.Ifthetrusteeincludesarelease–especiallyareleasesupportedbyconsideration–itmaybedeemedtohavereceivedconsiderationformakingthedisclaimer,whichcouldmakethedisclaimerineffectivefortaxpurposes.170Inorderforthereleasetobeeffective,thebeneficiarymustbeactingonfullinformation171andmusthavefullknowledgeofthecircumstancessurroundingtheagreement.”172

f. Examples

Thefollowingexampleshelpillustratewhoisentitledtonotice.Intheseexamples,Parentistheparentoftwoadultchildren,SonandDaughter.Parenthasnodeceasedchildren.Sonhastwochildren,Grandchild1,whoisanadult,andGrandchild2,whoisaminor.Daughterhasnochildrenorotherdescendants.

167Unlikeaparentofaminorwithnoguardianorconservator,acourt‐appointedguardianoftheestateofaminororincapacitatedbeneficiaryprobablycansignawaiverunderTex.Prop.Code§240.0081(e)sincetheguardianisthebeneficiary’slegalrepresentative.Ofcourse,theguardianprobablyneedstogetcourtapprovalbeforedisclaiming.168Montgomeryv.Kennedy,669S.W.2d309,313(Tex.1984).169Section114.005oftheTrustCodedoesnotsaythatareleasebyabeneficiarymustbesupportedbyconsideration.Itsaysthebeneficiarymustbeactingon“fullinformation.”Section114.032oftheTrustCodedoesnotsaythatawrittenagreementbetweenabeneficiaryandatrusteemustbesupportedbyconsiderationinordertobebindingonthebeneficiary.Itsaysthatthebeneficiarymusthave“fullknowledgeofthecircumstancessurroundingtheagreement.”170“[T]heacceptanceofanyconsiderationinreturnformakingthedisclaimerisanacceptanceofthebenefitsoftheentireinterestdisclaimed,”andaqualifieddisclaimercannotbemadeifthedisclaimanthasacceptedanyofthebenefitsofthedisclaimedproperty.Treas.Reg.§25.2518‐2(d)(1).171Tex.TrustCode§114.005.172Tex.TrustCode§114.032(a)(3).


1. Thetrusttermsprovideforhealth,education,maintenanceandsupport(“HEMS”)distributionstoParentforlife.WhenParentdies,thetrustterminatesandpassesoutrighttoParent’sdescendants,perstirpes.IfnoneofParent’sdescendantsisliving,onterminationthetrustpropertypassestoCharity.NoticemustbegiventoParent,whoistheonlycurrentbeneficiary,andtoSonandDaughter,whoaretheonlypresumptiveremainderbeneficiaries.Parent,SonandDaughtermaywaivethenoticerequirement.

2. ThetrusttermsprovideforHEMSdistributionstoParentforlife.WhenParentdies,thetrustcontinues,withseparatesharesforSonandDaughter,whoareentitledtoreceiveHEMSdistributionsforlife.ThetrustterminatesonthedeathsofSonandDaughterandpassesoutrighttoParent’sdescendants,perstirpes.IfnoneofParent’sdescendantsisliving,onterminationthetrustpropertypassestoCharity.Ifnobeneficiarywaivesnotice,noticemustbegiventoParent,whoistheonlycurrentbeneficiary,andtoSonandDaughter,whoaretheonlypresumptiveremainderbeneficiaries.Parent,SonandDaughtermaywaivethenoticerequirement.

3. ThetrusttermsprovideforHEMSdistributionstoParentandParent’sdescendantsforlife.WhenParentdies,thetrustterminatesandpassesoutrighttoParent’sdescendants,perstirpes.IfnoneofParent’sdescendantsisliving,onterminationthetrustpropertypassestoCharity.NoticemustbegiventoParent,Son,Daughter,Grandchild1andGrandchild2,sinceallarecurrentbeneficiaries.Parent,Son,DaughterandGrandchild1maywaivenotice.SinceGrandchild2isaminor,thenoticemustbegiventohisorherparent,sothenoticemaybegiventoSon.Soncanwaivenoticeonhisownbehalf,buthecannotwaivenoticeonbehalfofGrandchild2,soformalnoticetoSonasparentofGrandchild2mustbegiven.

4. ThetrusttermsprovideforHEMSdistributionstoParentforlife.WhenParentdies,thetrustterminatesandpassestoCharity.NoticemustbegiventoParent,whoistheonlycurrentbeneficiary,toCharity,whoistheonlypresumptiveremainderbeneficiary,andtotheattorneygeneralpursuanttoSection240.0081(c).ParentandCharitymaywaivenotice.Theattorneygeneralmaynotwaivenotice,soformalnoticemustbegiventotheattorneygeneralevenifCharitywaivesnotice.

5. ThetrusttermsprovideforHEMSdistributionstoParentforlife.Parenthasabroadspecialtestamentarypowerofappointment.WhenParentdies,thetrustterminates.IfParenthasnotexercisedParent’spowerofappointment,thetrustpropertypassesoutrighttoParent’sdescendants,perstirpes.IfnoneofParent’sdescendantsisliving,onterminationthetrustpropertypassestoCharity.ThetrusteehasnotbeennotifiedwhetherornotParenthasexercisedParent’spowerofappointment.NoticemustbegiventoParent,whoistheonlycurrentbeneficiary,andtoSonandDaughter,whoaretheonlypresumptiveremainderbeneficiaries.Parent,SonandDaughtermaywaivethenoticerequirement.


6. ThetrusttermsprovideforHEMSdistributionstoParentforlife.Parenthasabroadspecialtestamentarypowerofappointment.WhenParentdies,thetrustterminates.IfParenthasnotexercisedParent’spowerofappointment,thetrustpropertypassesoutrighttoParent’sdescendants,perstirpes.IfnoneofParent’sdescendantsisliving,onterminationthetrustpropertypassestoCharity.ThetrusteehasbeennotifiedthatParenthasmadea(revocable)willexercisingParent’spowerofappointmentinfavorofCharity.NoticemustbegiventoParent,whoistheonlycurrentbeneficiary.ItisnotclearunderTex.TrustCode§112.071(7)whothepresumptiveremainderbeneficiariesare,sothesafestcourseistogivenoticetoSon,Daughter,Charityandtheattorneygeneral.Theattorneygeneralcannotwaivenotice,soformalnoticemustbegiventotheattorneygeneralevenifCharitywaivesnotice.

2. Whatmustthenoticecontain?

Section204.0081(f)providesthatthenoticemuststatethatincludeastatementthat:(A)thetrusteeintendstodisclaimaninterestinproperty;(B)ifthetrusteemakesthedisclaimer,thepropertywillnotbecometrustpropertyandwillnotbeavailabletodistributetothebeneficiaryfromthetrust;(C)thebeneficiaryhastherighttoobjecttothedisclaimer;and(D)thebeneficiarymaypetitionacourttoapprove,modify,ordenythedisclaimer.Whilethenoticemustsaythatthetrustee“intendstodisclaim,”thestatutedoesnotobligatethetrusteetodisclaimjustbecausethenoticeissent.Rather,itanticipatesthatthetrusteemaynotdisclaimdespitegivingthenotice.173

Thenoticealsomustdescribetheinterestinpropertythetrusteeintendstodisclaim,specifytheearliestdatethetrusteeintendstomakethedisclaimer,andincludethenameandmailingaddressofthetrustee.174Thenoticemustbegivennotlaterthanthe30thdaybeforethedatethedisclaimerismade.175Itmustbesentbypersonaldelivery,first‐classmail,facsimile,e‐mail,oranyothermethodlikelytoresultinthenotice’sreceipt.176

Thetrusteehasadutytodisclosematerialfactsknowntothetrusteethatmightaffectbeneficiaries’rights.177Whilethescopeofthisdutyissubjecttodebate,adisclaimerislikelytobeconsideredamaterialfactthatthetrusteemustdisclose.Therefore,thetrusteeshoulddisclosetheunderlyingfactsandthereasonformakingthedisclaimer.Thisdisclosurecouldbeincludedinthenoticeitself,butitmaybebettertokeepthenoticeformsimpleandmakethedisclosureinoneormoreseparatedocumentsincludedwiththenotice.

AformofnoticeisincludedinAppendix2.

173Se,e.g.,Section240.0081(h),whichbegins“Ifthetrusteemakesthedisclaimerforwhichnoticeisprovided….”174Tex.Prop.Code§240.0081(f)(2),(3)and(4).175Tex.Prop.Code§240.0081(f)(5).176Tex.Prop.Code§240.0081(f)(6).177Montgomeryv.Kennedy,669S.W.2d309,313(Tex.1984).


3. Whenmaythetrusteedisclaim?

Thenoticemustspecifytheearliestdatethetrusteeintendstomakethedisclaimer,anditmustbegivennotlaterthanthe30thdaybeforethedatethedisclaimerismade.178

Thestatutedoesnotstatewhetheranoticeisdeemedtohavebeengivenonthedateofsendingoronthedateofreceipt.Sincemultiplemethodsofdeliveryareauthorized,includingpersonaldelivery,faxandemail,179thetrusteecaneliminatethisuncertaintybyusingpersonaldeliverywithproofofdelivery.Ifpersonaldeliveryisimpracticalorundesirable,thetrusteemaysendthenoticebymultiplemethods,includingamethodlikefaxoremailthatassuresimmediatedeliveryandincludingamethodthatrequiresacknowledgementofreceipt,suchasfirst‐classcertifiedmail,returnreceiptrequested.

Sincethenoticemuststatetheearliestpossibledateofthedisclaimerandmustbegivennotlaterthanthe30thdaybeforethedatethedisclaimerismade,the“earliestdatethetrusteeintendstomakethedisclaimer”statedinthenoticeshouldbethe30thdayafterthenoticeissent,evenifthetrusteeconservativelyistreatingthedatenoticeisgiventobethedateofreceiptratherthanthedateofsending.Ofcourse,thetrusteeshouldnotdisclaimbeforethe30thdayafternoticeisactuallygiven.

Isthetrusteerequiredtowait30daysifallbeneficiarieswaivenotice?Probablynot.Theonlymentionofthe30‐dayrequirementisinthenoticeitself.Ifnonoticeisrequiredbecauseallbeneficiarieswaivenotice,thenthe30‐daywaitingperiodshouldnotapply.180

Ifthenine‐monthdeadlinefortaxpurposesisrelevant,thetrusteewishingtodisclaimmustgivethenoticessufficientlyearlysothatthe30‐dayperiodexpiresbeforethedeadline.Itisdangeroustobelievethatwaiverswillpermitdelayingthenoticebeyondtheeight‐monthmark.Asmentionedaboveinthesectionentitled“Waiverandotherexceptionstothenoticerequirement,”ifacurrentorpresumptiveremainderbeneficiaryisaminor,anincapacitatedpersonoracharity,itislikelytobeimpossibletoavoidtheneedtogiveatleastonenotice.Thismeansthat,evenifalloftheadultsareinagreementthatadisclaimershouldbemade,thetrusteemaybebarredfrommakingadisclaimerwithoutcourtapprovalifhediscoverstheneedforanoticeatthelastminute.

178Tex.Prop.Code§240.0081(f).179Tex.Prop.Code§240.0081(f)(6).180Section240.008(d)(2)requiresthetrusteedesiringtodisclaimwithoutcourtapprovaltoprovidewrittennoticeofthedisclaimerinaccordancewithSection240.0081.IfunderSection240.0081nonoticeisrequiredbecauseallbeneficiarieswaivethenoticerequirement,thenthetrusteehasnotprovidedwrittennotice,butthetrusteehascompliedwiththenoticerequirementsofSection240.0081.ThemostconservativeapproachwouldbetosendatleastonenoticesothatSection240.008(d)(2)isclearlytriggered.


4. Whatshouldabeneficiarydoifheorshedoesnotwantthetrusteetodisclaim?

Thenoticeprovidesthatabeneficiaryhastherighttoobjecttothedisclaimerandthatthebeneficiarymaypetitionacourttoapprove,modify,ordenyadisclaimer.181Section240.0081(h)providesthatabeneficiaryreceivinganoticedoesnotlosethebeneficiary’sright,ifany,tosuethetrusteeforbreachofthetrustee’sfiduciaryobligationsinconnectionwithmakingthedisclaimer.182

Whilethenoticemustsaythatabeneficiarymayobjecttothedisclaimer,thestatutedoesnotprovideamechanismforortheconsequencesofanobjection.Whileinmanycasesatrusteereceivingabeneficiary’sobjectioninanyformmaychooseeithernottodisclaimortoseekcourtapprovalofthedisclaimer,thereisnothingtopreventthetrusteefromignoringtheobjectionanddisclaimingwithoutcourtapproval.

Theonlywayforabeneficiarytoblockadisclaimeristopetitionacourttomodifyordenythedisclaimer.Whilethenoticementionsthisright,thestatutedoesnotdescribetheprocedureorbasisforthisaction.Topreventthetrusteefromdisclaiming,thebeneficiaryshouldseekinjunctiverelieforsimilarequitablereliefratherthansimplyfilingapetition.Ifthedisclaimeristax‐motivated,thetrusteemustdisclaimwithinninemonthsoftheeventtriggeringthedisclaimer(usuallythedecedent’sdeath).Evenwhenfacedwithalawsuit,oncethetrusteehasgiventhenoticeandthe30‐dayperiodelapses,thetrusteehasthepowertodisclaimunlessorderednottodosobythecourt.

Oncethedisclaimerismade,thebeneficiarymaypursueabreachoffiduciarydutyclaimagainstthetrustee.However,thebeneficiarycannotundothedisclaimerbasedonbreachoffiduciaryduty,183sohisorherremedieswouldbelimitedtodamages,removalofthetrustee,etc.Thedisclaimedpropertywouldbegone.Ifthetrusteeisjudgment‐proof,asapracticalmatterthebeneficiarymayhavenoremedy.

D. Seekingcourtapprovaloffiduciarydisclaimers

1. Necessaryparties

Afiduciary’ssuittoapproveadisclaimerwouldbesubjecttothesamenecessarypartyrulesasanyactioninvolvingthattypeoffiduciary.TheTexasDisclaimerActdoesnotaddorremovenecessaryparties.

Theguardianofanestatewishingtodisclaimhastonotifythosepersonswhohavemadeappearancesintheguardianshipproceeding.Thecourtmaywishtoappointanattorneyadlitemorguardianadlitemfortheward.However,anadlitemisnot

181Tex.Prop.Code§240.0081(f)(1).182Section240.008(f)providesthat,unlessacourtapprovesthedisclaimer,adisclaimerbyafiduciaryactinginafiduciarycapacitymustbecompatiblewiththefiduciary’sfiduciaryobligations.183Tex.Prop.Code§240.008(g).


expresslyrequired.Sincetheguardianoftheestateistheward’slegalrepresentative,logicallyanadlitemshouldnotbenecessary,assumingthattheguardianwillnotpersonallybenefitfromthedisclaimer.

Theagentunderadurablepowerofattorneymustmaketheprincipalaparty.Iftheprincipalisincapacitated,thecourtmayappointanattorneyadlitemorguardianadlitemfortheprincipal.Theprincipal’sheirsandpresumptivewillbeneficiariesshouldnotbenecessarypartiesandmaynotbepermissibleparties.

Thepersonalrepresentativeofadecedent’sestateshouldmakeallpersonsinterestedintheestateparties.184

ThetrusteeofatrustcreatedunderSection142.005ofthePropertyCodeorunderChapter1301oftheEstatesCodeprobablyneedstomakethebeneficiaryofthetrustaparty,andifthatbeneficiaryisincapacitated,thecourtmayappointaguardianadlitemorattorneyadlitem.Thepersonforwhomoneofthesetrustsiscreatedisthesolebeneficiaryofthetrust,185soremainderbeneficiariesorfamilymemberswithexpectanciesshouldnotbenecessarypartiestotheaction.186

Whilecurrentbeneficiariesandpresumptiveremainderbeneficiariesofanon‐court‐createdtrustareentitledtonoticeifthetrusteechoosesnottoseekcourtapprovalofthedisclaimer,187theTexasDisclaimerActdoesnotsaythatcurrentbeneficiariesandpresumptiveremainderbeneficiariesarenecessarypartiestoanactiontoapproveadisclaimer.Theonlynecessarypartiesare(a)abeneficiarydesignatedbynameinthetrustinstrument(unlessthatbeneficiary’sinteresthasbeendistributed,extinguished,terminatedorpaid),(b)apersonwhoisactuallyreceivingdistributionsfromthetrustatthetimetheactionisfiled,and(c)thetrustee.188However,apersonwhoisnotmadeapartymaynotbeboundbythejudgment,sothetrusteemaywishtomakeallbeneficiariesnotvirtuallyrepresentedbyanotherbeneficiarypartiestotheaction.189

2. Forum

Asuittoapproveadisclaimerbroughtbyaguardianorpersonalrepresentativeshouldbebroughtinthecourtinwhichtheguardianshiporadministrationispending.190

184“Personinterested”meansanheir,devisee,spouse,creditor,oranyotherhavingapropertyrightinorclaimagainstanestatebeingadministered.Tex.Est.Code§22.018(1).185Tex.Prop.Code§142.005(b)(1);Tex.Est.Code§1301.101(a)(1).186SeeTex.TrustCode§115.011(b).187Tex.Prop.Code§240.0081(a).188Tex.TrustCode115.011(b).Abeneficiaryofatrustonwhoseactorobligationtheactionispredicatedalsoisanecessaryparty,butatrustee’sactiontoapproveadisclaimerisnotpredicatedonanactorobligationofabeneficiary.189SeeTex.TrustCode§115.013.190Tex.Est.Code§§1021.001and1151.102(c)(6).


Asuittoapproveadisclaimerbroughtbythetrusteeofacourt‐createdtrustshouldbebroughtinthecourtwhichcreatedthetrust.191

Asuittoapproveadisclaimerbroughtbyanagentunderapowerofattorneymaybebroughtinthedistrictcourtorinastatutoryprobatecourt.192

Asuittoapproveadisclaimerbroughtbyatrusteeofanon‐court‐createdtrustmaybebroughtinadistrictcourtorastatutoryprobatecourt.193Ifthetrustisatestamentarytrustcreatedbyadecedentwhosewillwasprobatedinacountycourtatlaw,orifthetrustisanintervivostrustcreatedbyadecedentwhosewillwasprobatedinacountycourtatlaw,thesuitmaybebroughtinthatcountycourtatcourt.194

3. Judgment

Ifthefiduciaryandthebeneficiariesagreetothejudgmentapprovingadisclaimer,isthedisclaimerineffectivefortaxpurposes?TheInternalRevenueServicehasattackeddisclaimersbasedonapre‐arrangedplan,195andtheacceptanceofanyconsiderationinreturnformakingthedisclaimerisanacceptanceofthebenefitsoftheentireinterestdisclaimed.196Merelyagreeingtothetermsofthejudgmentdoesnotinvolveconsideration,andtheTexasDisclaimerActprovidesforandinsomecasesrequirescourtapproval,sohavingthepartiessignanagreedjudgmentshouldnotkeepthedisclaimerfrombeingqualifiedfortaxpurposes.Still,todistancethedisclaimerfromaMonroe‐typeattack,itispreferableforthejudgmenttobeenteredwithouttheagreementofthefiduciary.197

5. Conclusion

Disclaimerscanbeeffectivetoolsinplanningandadministration.TheTexasUniformDisclaimerofPropertyInterestsActshouldmakedisclaimerseasierandmoreeffective.

191Tex.Est.Code§1301.151;Tex.Prop.Code§142.005(d).192Tex.Est.Code§32.006.193Tex.TrustCode§115.001;Tex.Est.Code§§32.006and32.007.194Tex.Est.Code§§31.002(b)and32.001(a).195SeeEstateofMonroev.Commissioner,124F.3d699(5thCir.1997).InMonroe,theIRSattackbasedonapre‐arrangedplanwassuccessfulintheTaxCourt,buttheFifthCircuitoverturnedtheTaxCourt.196Treas.Reg.§25.2518‐2(d)(1).197Ajudgmentwhichisnotagreedtobyallpartiesdoesnotbecomefinalandnonappealablefor30daysafterthejudgmentissigned.TexasRuleofCivilProcedure329b(d)and(f).Ideallythetrusteecantimetheproceedingsothatthejudgmentbecomesfinalandnonappealablebeforethedisclaimerismade.Assumingnopartyappeals,thismeansthatideallythejudgmentshouldbesignedmorethan30daysbeforethedisclaimer.


Appendix1–TheTexasUniformDisclaimerofPropertyInterestsAct(PropertyCodeChapter240)–TextandCommentary

Title TextofStatute Commentary240.001.ShortTitle.

Thischaptermaybecitedas theTexasUniformDisclaimerofPropertyInterestsAct.

ThedisclaimeractisfoundinthePropertyCode,butitisnotapartoftheTrustCode.JustlikeTex.Prop.Code§111.001permitsareferencetothe“TexasTrustCode,”thissectionpermitspractitionerstorefertothischapterbytitle.

240.002.Definitions.

Inthischapter:(1)"Current beneficiary" and "presumptiveremainder beneficiary" have the meaningsassignedbySection112.071.(2)"Disclaim" means to refuse to accept aninterest in or power over property, includinganinterestorpowerthepersonisentitledto:

(A)byinheritance;(B)underawill;(C)byanagreementbetweenspouses for

community property with a right ofsurvivorship;

(D)by a joint tenancy with a right ofsurvivorship;

(E)bya survivorship agreement, account,or interest in which the interest of thedecedentpassestoasurvivingbeneficiary;

(F)by an insurance, annuity, endowment,employment,deferredcompensation,orothercontractorarrangement;

(G)under a pension, profit sharing, thrift,stock bonus, life insurance, survivor income,incentive,orotherplanorprogramprovidingretirement, welfare, or fringe benefits withrespect to an employee or a self‐employedindividual;or

(H)byaninstrumentcreatingatrust.(3)"Disclaimant"means:

(A)the person to whom a disclaimedinterestorpowerwouldhavepassedhad thedisclaimernotbeenmade;

(B)the estate to which a disclaimedinterestorpowerwouldhavepassedhad thedisclaimer not been made by the personalrepresentativeoftheestate;or

(C)the trust into which a disclaimedinterestorpowerwouldhavepassedhad thedisclaimernotbeenmadebythetrusteeofthetrust.(4)"Disclaimed interest" means the interestthatwouldhavepassedtothedisclaimanthadthedisclaimernotbeenmade.(5)"Disclaimedpower"meansthepowerthat

(1)Thedefinitionsof“currentbeneficiary”and“presumptiveremainderbeneficiary”areneededtodeterminetowhomatrusteemustgivenoticeofintentiontodisclaimunderSection240.0081.(3)Atrustcanbea“disclaimant”eventhoughitisnota“person”underSection240.002(10).Thepurposeofthedefinitionof“disclaimant”istoidentifytheperson,estateortrusttowhomdisclaimedpropertywouldhavepassed,notthefiduciaryholdinglegaltitle.(13)“Survivorshipproperty”(governedbySections240.052and240.106)includesmultiplepartyaccountswithrightsofsurvivorshipandcommunitypropertywithrightofsurvivorship.Itdoesnotincludepayondeathortransferondeathaccounts,whichare“beneficiarydesignation”propertysubjecttoSection240.105.


Title TextofStatute Commentarywouldhavebeenpossessedbythedisclaimanthadthedisclaimernotbeenmade.(6)"Disclaimer" means the refusal to acceptaninterestinorpoweroverproperty.(7)"Estate" has the meaning assigned bySection22.012,EstatesCode.(8)"Fiduciary" means a personalrepresentative,atrustee,anattorneyinfactoragentactingunderapowerofattorney,oranyother person authorized to act as a fiduciarywithrespecttothepropertyofanotherperson.(9)"Guardian" has the meaning assigned bySection1002.012,EstatesCode.(10)Notwithstanding Section 311.005,Government Code, "person" means anindividual, corporation, including a publiccorporation, business trust, partnership,limited liability company, association, jointventure, governmental entity, including apolitical subdivision, agency, orinstrumentality,oranyotherlegalentity.(11)"Personal representative" has themeanings assigned by Sections 22.031 and1002.028,EstatesCode.(12)"State"meansastateoftheUnitedStates,the District of Columbia, Puerto Rico, theUnitedStatesVirginIslands,oranyterritoryorinsularpossessionsubjecttothejurisdictionoftheUnitedStates.ThetermincludesanIndiantribe or band, or Alaskan native village,recognized by federal law or formallyacknowledgedbyastate.(13)"Survivorship property"means propertyheld in the name of two or more personsunderanarrangement inwhich,on thedeathof one of the persons, the property passes toand is vested in the other person or persons.Thetermincludes:

(A)property held by an agreementdescribedinSection111.001,EstatesCode;

(B)property held by a communityproperty survivorship agreement defined inSection112.001,EstatesCode;and

(C)property ina jointaccountheldbyanagreement described in Section 113.151,EstatesCode.(14)"Trust" has the meaning assigned bySection111.003.(15)"Ward" has the meaning assigned bySection22.033,EstatesCode.


Title TextofStatute Commentary240.003ApplicabilityofChapter.

This chapter applies to disclaimers of anyinterest inorpoweroverproperty,whenevercreated.

Thenewstatuteappliestoalldisclaimersofinterestinorpoweroverproperty,eveniftheinterestorpower(ortherighttodisclaimit)arosepriortothenewlaw’seffectivedateofSeptember1,2015.HB2428’seffectivedateprovisionsmaketheoldlawcontinuetoapplytoanydisclaimerwherethetimeperiodfornoticeorfilinghadlapsedpriortothenewlawbecomingeffective.Becauseofthenine‐monthtimelimitunderthepriorlaw,December1,2014,isanimportantdate.Ifthedecedentdiedbeforethatdate,theoldlawapplies.IfthedecedentdiedonorafterDecember1,2014,butbeforeSeptember1,2015,thepersondisclaiminghasachoice:(a)disclaimbeforeSeptember1,2015,usingtheoldlawor(b)disclaimonorafterSeptember1,2015,usingthenewlaw,whichwouldmeanthatthenine‐monthdeadlineundertheoldlawwouldnotapply.IfthedecedentdiedonorafterSeptember1,2015,thenewlawapplies.

240.004.ChapterSupplementedbyOtherLaw.

(a) Unless displaced by a provision of thischapter, the principles of law and equitysupplementthischapter.(b)This chapter doesnot limit any right of apersontowaive,release,disclaim,orrenounceaninterestinorpoweroverpropertyunderastatuteotherthanthischapter.

Becausethissectiondoesnotlimitdisclaimerrightsunderanother“statute,”notanother“law,”thissectionprobablybarscommonlawdisclaimers.Thepriordisclaimerstatuteeffectivelybarredcommonlawdisclaimers,butthenewactisnotasclearonthispoint.

240.005.UniformityofApplicationandConstruction.

In applying and construing this chapter,consideration must be given to the need topromoteuniformityofthelaw,withrespecttothe subject matter of this chapter, amongstates that enact a law based on the uniformactonwhichthischapterisbased.

Versionsoftheuniformacthavebeenenactedin18states.Texascourtsaredirectedtoconsiderjudicialdecisionsinotherstatesinterpretingtheuniformact.

240.006.PowertoDisclaimbyPersonOtherThanFiduciary.

(a) A person other than a fiduciary maydisclaim,inwholeorinpart,anyinterestinorpower over property, including a power ofappointment.(b)A person other than a fiduciary maydisclaim an interest or power under thissection even if the creator of the interest orpower imposed a spendthrift provision orsimilar restriction on transferor a restrictionorlimitationontherighttodisclaim.

Thisstatesthegeneralrulethatapersonmaydisclaimaninterestinorpoweroverpropertyinwholeorinpart.Aperson’spowertodisclaimisnotlimitedbyspendthriftprovisionsorrestrictionsontransfersordisclaimerrightscontainedintheinstrument.Anindividualnamedasabeneficiarycannotbeforcedtoacceptpropertyevenifthetestatororsettlorpurportstoprohibitdisclaimersinthewillortrustinstrument.


Title TextofStatute Commentary240.007.PowertoDisclaimPowerHeldinFiduciaryCapacitybyPersonDesignatedtoServeAsorServingAsFiduciary.

(a)SubjecttoSubsection(b)andexcepttotheextent the person's right to disclaim isexpresslyrestrictedorlimitedbyalawofthisstate or by the instrument creating thefiduciary relationship, a person designated toserveorservingasafiduciarymaydisclaim,inwhole or in part, any power over property,including a power of appointment and thepowertodisclaim,heldinafiduciarycapacity.(b)If a power being disclaimed underSubsection(a)byapersondesignatedtoserveor servingasa trusteeaffects thedistributiverightsofanybeneficiaryofthetrust:

(1)the person may disclaim only on orafteracceptingthetrust;

(2)the disclaimer must be compatiblewiththetrustee'sfiduciaryobligations;and

(3)if thedisclaimer ismadeonacceptingthe trust, the trustee is considered to haveneverpossessedthepowerdisclaimed.(c)Apersondesignatedtoserveorservingasa fiduciary may disclaim a power under thissection even if the creator of the powerimposed a spendthrift provision or similarrestrictionontransfer.

Thissectionprovidesthatapersonnamedasafiduciary(suchastheexecutorofanestate)maydisclaimapowergiventothepersoninafiduciarycapacitybeforeorafterthepersonbeginstoserveasafiduciary.Thepersonmaywishtodosobeforebeginningtoservesothatheorshewillnotbeactingasafiduciary(and,therefore,subjecttofiduciaryduties)whenmakingthedisclaimer.Ifatrusteewishestodisclaimapowerwhichcouldadverselyaffecttrustbeneficiaries’distributiverights,heorshemaydosoonlyafterbecomingtrustee,andthedisclaimermustbecompatiblewithhisorherfiduciaryobligationsastrustee.Thisgivesthebeneficiariesrecoursetosuethetrusteeif,bydisclaimingthedistributivepower,theinterestsofthebeneficiariesareharmed.

240.008.PowertoDisclaimbyFiduciaryActinginFiduciaryCapacity.

(a) Subject to this section and except to theextent the fiduciary's right to disclaim isexpresslyrestrictedorlimitedbyalawofthisstate or by the instrument creating thefiduciary relationship, a fiduciary acting in afiduciarycapacitymaydisclaim,inwholeorinpart, any interest in or power over property,including a power of appointment and thepower todisclaim, thatwouldhavepassed tothe ward, estate, trust, or principal withrespect towhich the fiduciarywasactinghadthedisclaimernotbeenmadeevenif:

(1)the creator of the interest or powerimposed a spendthrift provision or similarrestriction on transfer or a restriction orlimitationontherighttodisclaim;or

(2)an instrument other than theinstrument that created the fiduciaryrelationship imposed a restriction orlimitationontherighttodisclaim.(b)ExceptasprovidedbySubsection (c), (d),or (f), a disclaimer by a fiduciary acting in afiduciary capacity does not require courtapprovaltobeeffectiveunlesstheinstrumentthatcreatedthefiduciaryrelationshiprequirescourtapproval.(c)The following disclaimers by a fiduciaryacting ina fiduciarycapacityarenoteffective

Thissectionprovidestherulesfordisclaimersbyfiduciariesactinginafiduciarycapacity.Itspecifiesdifferentrequirementsforcourt‐supervisedpersonalrepresentativesthanforindependentexecutorsandfortrusteesofcourt‐createdtruststhanfortrusteesofothertrusts.Anydisclaimerbyafiduciarywhichwouldcausethepropertytopasstothefiduciarypersonallymustbeapprovedbyacourt.Thiscouldapply,forexample,ifatrusteedisclaimspropertyonbehalfofatrustwhichcausesthepropertytopasstothetrusteeindividually.AtrusteeofatrustwhichisnotcourtsupervisedmusteithergivethenoticerequiredbySection240.0081orobtaincourtapprovalbeforedisclaiming.Seekingcourtapprovalprovidesgreaterprotectionforthetrustee,sinceafiduciarydisclaimerwithoutcourtapprovalmustbecompatiblewithatrustee’sfiduciaryobligations.Theremediesforabreachoffiduciarydutydonotincludedeclaringanotherwiseeffectivedisclaimervoidorgrantingotherlegalorequitablereliefthatwouldmakethe


Title TextofStatute Commentaryunless approved by a court of competentjurisdiction:

(1)a disclaimer by a personalrepresentative who is not an independentadministratororindependentexecutor;

(2)a disclaimer by the trustee of amanagement trust created under Chapter1301,EstatesCode;

(3)a disclaimer by the trustee of a trustcreatedunderSection142.005;or

(4)a disclaimer that would result in aninterest inorpoweroverpropertypassing tothepersonmakingthedisclaimer.(d)Atrusteeactinginafiduciarycapacitymaynotdisclaimaninterestinpropertythatwouldcause the interest in property not to becometrustpropertyunless:

(1)a court of competent jurisdictionapprovesthedisclaimer;or

(2)the trustee provideswritten notice ofthe disclaimer in accordance with Section240.0081.(e)In the absence of a court‐appointedguardian, without court approval, a naturalguardian as described by Section 1104.051,Estates Code, may disclaim on behalf of aminor child of the natural guardian, inwholeor in part, any interest in or power overproperty, including a power of appointment,that the minor child is to receive solely as aresult of another disclaimer, but only if thedisclaimedinterestorpowerdoesnotpasstoor for thebenefitof thenaturalguardianasaresultofthedisclaimer.(f)Unless a court of competent jurisdictionapproves the disclaimer, a disclaimer by afiduciaryactinginafiduciarycapacitymustbecompatible with the fiduciary's fiduciaryobligations. Adisclaimerbyafiduciaryactinginafiduciarycapacityisnotapersebreachofthefiduciary'sfiduciaryobligations.(g)Possibleremediesforabreachoffiduciaryobligations do not include declaring anotherwiseeffectivedisclaimervoidorgrantingotherlegalorequitablereliefthatwouldmakethedisclaimerineffective.

disclaimerineffective.Thishelpsassurefinalityindisclaimers.Abeneficiarymayhaveanactionfordamagesorremovalagainstthefiduciarywhodisclaims,butthebeneficiarycannotundothedisclaimerbasedonbreachoffiduciaryduty.


Title TextofStatute Commentary240.0081.NoticeRequiredbyTrusteeDisclaimingCertainInterestsinProperty;EffectofNotice.

a)Atrusteeactinginafiduciarycapacitymaydisclaim an interest in property that wouldcause the interest in property not to becometrust property without court approval if thetrustee provides written notice of thedisclaimer to all of the current beneficiariesand presumptive remainder beneficiaries ofthetrust.(b)For the purpose of determining who is acurrentbeneficiaryorpresumptiveremainderbeneficiary entitled to the notice underSubsection (a), a beneficiary isdeterminedasofthedatethenoticeissent.(c)In addition to the notice required underSubsection (a), the trustee shall give writtennotice of the trustee's disclaimer to theattorneygeneralif:

(1)acharityisentitledtonotice;(2)acharityentitledtonoticeisnolonger

inexistence;(3)the trustee has the authority to

distributetrustassetstooneormorecharitiesthatarenotnamedinthetrustinstrument;or

(4)the trustee has the authority tomakedistributions for a charitable purposedescribed in the trust instrument, but nocharity is named as a beneficiary for thatpurpose.(d)If the beneficiary has a court‐appointedguardianorconservator,thenoticerequiredtobegivenbythissectionmustbegivento thatguardianorconservator.Ifthebeneficiaryisaminor for whom no guardian or conservatorhasbeenappointed, thenoticerequired tobegivenbythissectionmustbegiventoaparentoftheminor.(e)Thetrustee isnotrequiredtoprovidethenoticetoabeneficiarywho:

(1)isknownto the trusteeandcannotbelocated by the trustee after reasonablediligence;

(2)isnotknowntothetrustee;(3)waives the requirement of the notice

underthissection;or(4)is a descendant of a beneficiary to

whom the trustee has given notice if thebeneficiaryandthebeneficiary'sancestorhavesimilar interests in the trust andno apparentconflictofinterestexistsbetweenthem.(f)The notice required under Subsection (a)must:

(1)includeastatementthat:(A)the trustee intends todisclaiman

interestinproperty;

Thesenoticeprovisionsaremodeledonthenoticerequiredbeforeatrusteemaydecant(seeSection112.074oftheTexasTrustCode).Abeneficiarymaywaivenotice.Nonoticeisrequiredtobegiventodescendantsofabeneficiarywhovirtuallyrepresentshisorherdescendants–similarinterestswithnoapparentconflictofinterest.Thenoticemustincludespecificinformation,includingastatementthatthebeneficiaryhasarighttoobjecttothedisclaimerortopetitionacourttoapprove,modifyordenythedisclaimer.Actingornotactingonreceiptofanoticeofdisclaimerdoesnotconstituteacceptanceoftheproperty.Evenifthebeneficiarydoesnotobjectorpetitionacourtpriortothedisclaimer,heorshedoesnotlosehisorherrighttosuethetrusteeforbreachoffiduciaryobligations.However,oncethedisclaimerismadeafternotice,thedisclaimercannotbevoidedordeclaredineffectivebasedonbreachoffiduciaryduty.SeeSection240.008(g).


Title TextofStatute Commentary(B)if the trustee makes the

disclaimer,thepropertywillnotbecometrustpropertyandwillnotbeavailabletodistributetothebeneficiaryfromthetrust;

(C)the beneficiary has the right toobjecttothedisclaimer;and

(D)the beneficiary may petition acourt to approve, modify, or deny thedisclaimer;

(2)describe the interest in property thetrusteeintendstodisclaim;

(3)specify the earliest date the trusteeintendstomakethedisclaimer;

(4)include thenameandmailingaddressofthetrustee;

(5)be given not later than the 30th daybeforethedatethedisclaimerismade;and

(6)besentbypersonaldelivery,first‐classmail, facsimile, e‐mail, or any other methodlikelytoresultinthenotice'sreceipt.(g)A beneficiary is not considered to haveaccepted the disclaimed interest solelybecausethebeneficiaryactsordoesnotactonreceiptofanoticeprovidedunderthissection.(h)If the trustee makes the disclaimer forwhich notice is provided under this section,thebeneficiarydoesnot lose thebeneficiary'sright,ifany,tosuethetrusteeforbreachofthetrustee's fiduciary obligations in connectionwith making the disclaimer. Section240.008(g) applies to remedies sought inconnectionwiththeallegedbreach.

240.009.PowertoDisclaim;GeneralRequirements;WhenIrrevocable.

(a)Tobeeffective,adisclaimermust:(1)beinwriting;(2)declarethedisclaimer;(3)describe the interest or power

disclaimed;(4)be signed by the person making the

disclaimer;and(5)be delivered or filed in the manner

providedbySubchapterC.(b)Apartialdisclaimermaybeexpressedasafraction, percentage, monetary amount, termof years, limitation of a power, or any otherinterestorestateintheproperty.(c)A disclaimer is irrevocable on the later ofthedatethedisclaimer:

(1)is deliveredor filedunder SubchapterC;or

(2)takes effect as provided in Sections240.051‐240.056.(d)A disclaimer made under this chapter isnotatransfer,assignment,orrelease.

Adisclaimermustbeinwritingandsignedbythedisclaimant.Itdoesnotneedtobenotarized,althoughitmayhavetobenotarizedifitistobefiledintherealpropertyrecords.Partialdisclaimersarepermittedandmaybeexpressedinmanyways–fractional,monetaryamount,termofyears,etc.AsunderpriorTexaslaw,adisclaimerisnotatransferofpropertysincethedisclaimantistreatedasneverhavingreceivedtheproperty.However,sincethenine‐monthdeadlinefordisclaimingisremovedfromTexaslawbutremainsforfederalgifttaxpurposes,thedisclaimantmaybetreatedashavingmadeataxabletransferifthedisclaimerismadeafterthetaxdeadline.


Title TextofStatute Commentary240.0501.Definition.

In thissubchapter, "future interest"meansaninterestthat:(1)takeseffect inpossessionorenjoyment, ifat all, later than the time at which theinstrument creating the interest becomesirrevocable;and(2)passes to theholderof the interestat thetimeof the event that causes the takerof theinterest to be finally ascertained and theinteresttobeindefeasiblyvested.

240.051.DisclaimerofInterestinProperty.

(a) This section and Sections 240.0511 and240.0512 apply to a disclaimer of an interestinpropertyother thanadisclaimersubject toSection240.052or240.053.(b)Ifaninterestinpropertypassesbecauseofthedeathofadecedent:

(1)adisclaimeroftheinterest:(A)takes effect as of the time of the

decedent'sdeath;and(B)relatesbackforallpurposestothe

timeofthedecedent'sdeath;and(2)thedisclaimedinterestisnotsubjectto

theclaimsofanycreditorofthedisclaimant.(c)Ifaninterestinpropertypassesbecauseofaneventnotrelatedtothedeathofadecedent:

(1)adisclaimeroftheinterest:(A)takeseffect:

(i)as of the time the instrumentcreatingtheinterestbecameirrevocable;or

(ii)in the case of an irrevocabletransfer made without an instrument, at thetimeoftheirrevocabletransfer;and

(B)relatesbackforallpurposestothetimetheinstrumentbecameirrevocableorthetimeoftheirrevocabletransfer,asapplicable;and

(2)thedisclaimedinterestisnotsubjecttotheclaimsofanycreditorofthedisclaimant.(d)A disclaimed interest passes according toany provision in the instrument creating theinterestthatprovidesfor:

(1)the disposition of the interest if theinterestweretobedisclaimed;or

(2)thedispositionofdisclaimed interestsingeneral.(e)If the instrument creating the disclaimedinterestdoesnotcontainaprovisiondescribedbySubsection(d)and:

(1)if thedisclaimant is not an individual,the disclaimed interest passes as if thedisclaimantdidnotexist;or

(2)ifthedisclaimantisanindividual:(A)except as provided by Section

TheTexasDisclaimerActretainsthe relation‐backdoctrine.Adisclaimerrelatesbackforallpurposes to the time of the decedent’s death(or the time of irrevocable transfer), and thedisclaimedinterestisnotsubjecttotheclaimsofanycreditorofthedisclaimant.Federallawmay make the disclaimer ineffective in somecases. Forexample,adisclaimermadeafterabankruptcy petition is filed probably isineffective, anddisclaimersmaybe treatedastransfersforMedicaidqualificationpurposes.Thissectiondistinguishesbetweendisclaimersof interests passing because of a death andinterests passing because of an event notrelated to a death. Examples of an interestpassingbecauseofaneventnotrelatedtothedeathofadecedentare:(1)anirrevocablegiftofpropertyduringthedonor’slifetime;(a)aninterest created when a trust becomesirrevocablepriortothedeathofasettlor;and(3) an interest created when an incomeinterest in a trust terminates after a setnumber of years or on a specific date ratherthan on the death of the income beneficiary.The relation‐back doctrine applies both indeath‐related and non‐death relatedsituations.Iftheinstrumentcreatingthedisclaimedinterest(usuallyawillortrust,butalsopossiblyadeed,beneficiarydesignationorotherwriting)stateswhereaninterestgoesifitisdisclaimed,thetermsoftheinstrumentcontrol.Ifnot,thissectionandthefollowingtwosectionsgivetherulesfordeterminingwhoisentitledtoreceivethedisclaimedinterest.


Title TextofStatute Commentary240.0511, if the interest ispassingbecauseofthe death of a decedent, the disclaimedinterest passes as if the disclaimant had diedimmediately before the time as of which thedisclaimer takes effect under Subsection (b);or

(B)except as provided by Section240.0512, if the interest ispassingbecauseofaneventnotrelatedtothedeathofadecedent,the disclaimed interest passes as if thedisclaimant had died immediately before thetime as of which the disclaimer takes effectunderSubsection(c).(f)A disclaimed interest that passes byintestacy passes as if the disclaimant diedimmediatelybeforethedecedent.

240.0511.DispositionofInterestPassingBecauseofDecedent'sDeathandDisclaimedbyIndividual.

(a)SubjecttoSubsection(b):(1)if by law or under the instrument

creating the disclaimed interest thedescendants of a disclaimant of an interestpassing because of the death of a decedentwouldshare in thedisclaimed interestbyanymethod of representation under Section240.051(e)(2)(A), the disclaimed interestpasses only to the descendants of thedisclaimantwhosurvivethedecedent;or

(2)if the disclaimed interest would havepassed to the disclaimant's estate underSection 240.051(e)(2)(A), the disclaimedinterest instead passes by representation tothe descendants of the disclaimant whosurvivethedecedent.(b)If no descendant of the disclaimantsurvives thedecedent, thedisclaimed interestpassestothosepersons,includingthestatebutexcluding the disclaimant, and in such sharesaswouldsucceed to the transferor's intestateestate under the intestate succession law ofthe transferor's domicile had the transferordied immediately before the decedent, exceptthat if the transferor's surviving spouse isliving but remarried before the decedent'sdeath, the transferor is considered to havedied unmarried immediately before thedecedent'sdeath.(c)Onthedisclaimerofaprecedinginterest,afutureinterestheldbyapersonotherthanthedisclaimant takes effect as if the disclaimanthaddiedimmediatelybeforethedecedent,butafutureinterestheldbythedisclaimantisnotacceleratedinpossessionorenjoyment.

If the disclaimant's descendants are next inline, only those descendants who survive thedecedenttake.If the disclaimant's estate is next in line, thedisclaimed interest passes instead to thesurvivingdescendantsofthedisclaimant.If no descendant of the disclaimant survivesthe decedent, the interest passes to thetransferor's heirs at law,with no benefit to aremarriedsurvivingspouse.


Title TextofStatute Commentary240.0512.DispositionofInterestPassingBecauseofEventOtherThanDecedent'sDeathandDisclaimedbyIndividual.

(a)SubjecttoSubsection(b):(1)if by law or under the instrument

creating the disclaimed interest thedescendants of a disclaimant of an interestpassingbecauseofaneventnotrelatedtothedeath of a decedent would share in thedisclaimed interest by any method ofrepresentation under Section240.051(e)(2)(B), the disclaimed interestpasses only to the descendants of thedisclaimantlivingatthetimeoftheeventthatcausestheinteresttopass;or

(2)if the disclaimed interest would havepassed to the disclaimant's estate underSection 240.051(e)(2)(B), the disclaimedinterest instead passes by representation tothedescendantsofthedisclaimantlivingatthetime of the event that causes the interest topass.(b)If no descendant of the disclaimant isliving at the time of the event described bySubsection (a)(1), the disclaimed interestpassestothosepersons,includingthestatebutexcluding the disclaimant, and in such sharesaswouldsucceed to the transferor's intestateestate under the intestate succession law ofthe transferor's domicile had the transferordied immediately before the event describedby Subsection (a)(1), except that if thetransferor's surviving spouse is living butremarried before the event, the transferor isconsidered to have died unmarriedimmediatelybeforetheevent.(c)Onthedisclaimerofaprecedinginterest,afutureinterestheldbyapersonotherthanthedisclaimant takes effect as if the disclaimanthad died immediately before the time thedisclaimer takes effect under Section240.051(c)(1)(A),butafutureinterestheldbythe disclaimant is not accelerated inpossessionorenjoyment.

Therulesforaninterestpassingbecauseofaneventotherthanadecedent’sdeath(addressedinSection240.0512)areessentiallythesameasthoseforinterestspassingbecauseofadecedent’sdeath(addressedinSection240.0511),buttheyarestatedinaseparatesectionforclarity.

240.052.DisclaimerofRightsinSurvivorshipProperty.

(a) On the death of a holder of survivorshipproperty, a surviving holdermay disclaim, inwholeorinpart,aninterestinthepropertyofthe deceased holder that would haveotherwise passed to the surviving holder byreasonofthedeceasedholder'sdeath.(b)If an interest in survivorship property isdisclaimed by a surviving holder of theproperty:

(1)thedisclaimer:(A)takes effect as of the time of the

deceasedholder'sdeath;and

Adisclaimerbyapersonreceivingpropertybyrightofsurvivorshipappliestothatportionofthesurvivorshippropertywhichwouldotherwisehavepassedtothedisclaimant.Forcommunityproperty,thisisthedecedent’sone‐halfofsurvivorshipproperty.Formulti‐partyaccountswithrightofsurvivorship,thisistheportionoftheaccountthedecedentownedimmediatelypriortodeathusingtheproportionalcontributionrulefoundinSection113.102oftheEstatesCode.ForsurvivorshippropertyunderSection111.001


Title TextofStatute Commentary(B)relatesbackforallpurposestothe

timeofthedeceasedholder'sdeath;and(2)thedisclaimedinterestisnotsubjectto

theclaimsofanycreditorofthedisclaimant.(c)An interest in survivorship propertydisclaimed by a surviving holder of theproperty passes as if the disclaimantpredeceased the holder to whose death thedisclaimerrelates.

oftheEstatesCode,itiswhateverportionofthesurvivorshippropertythedecedentistreatedasowningimmediatelypriortodeath.

240.053.DisclaimerOfInterestByTrustee.

(a)Ifatrusteedisclaimsaninterestinpropertythatotherwisewouldhavebecometrustproperty:

(1)theinterestdoesnotbecometrustproperty;

(2)thedisclaimer:(A)takeseffectasofthetimethetrust

becameirrevocable;and(B)relatesbackforallpurposestothe

timethetrustbecameirrevocable;and(3)thedisclaimedinterestisnotsubjectto

theclaimsofanycreditorofthetrustee,thetrust,oranytrustbeneficiary.(b)Iftheinstrumentcreatingthedisclaimedinterestcontainsaprovisionthatprovidesforthedispositionoftheinterestiftheinterestweretobedisclaimed,thedisclaimedinterestpassesaccordingtothatprovision.(c)IftheinstrumentcreatingthedisclaimedinterestdoesnotcontainaprovisiondescribedbySubsection(b),thedisclaimedinterestpassesasif:

(1)allofthecurrentbeneficiaries,presumptiveremainderbeneficiaries,andcontingentbeneficiariesofthetrustaffectedbythedisclaimerwhoareindividualsdiedbeforethetrustbecameirrevocable;and

(2)allbeneficiariesofthetrustaffectedbythedisclaimerwhoarenotindividualsceasedtoexistwithoutsuccessororganizationsandwithoutsubstitutionofbeneficiariesunderthecypresdoctrinebeforethetrustbecameirrevocable.(d)Subsection(c)appliesonlyforpurposesofdeterminingthedispositionofaninterestinpropertydisclaimedbyatrusteethatotherwisewouldhavebecometrustpropertyandappliesonlywithrespecttothetrustaffectedbythedisclaimer.Subsection(c)doesnotapplywithrespecttoothertrustsgovernedbytheinstrumentanddoesnotapplyforotherpurposesundertheinstrumentorunderthelawsofintestacy.

Disclaimedpropertythatwouldhavebecometrustpropertypassespursuanttothetermsoftheinstrument.Thisgivestheestateplanningattorneydraftingthewillortrusttheabilitytodirectwhathappensifthetrusteedisclaims.Ifnoprovisionismadeforpassageofadisclaimedinterest,thetrustistreatedasneverhavingexistedforpurposesofthedisclaimedinterest,andtheinterestpassestothenextbeneficiaryinlineafterthetrustunderthetermsoftheinstrument.Becauseabeneficiaryofthetrustaffectedbythedisclaimerislikelytobeanoutrightrecipientofthedisclaimedpropertyorabeneficiaryofthetrustwhichreceivesdisclaimedproperty,Section240.053(d)providesthatthebeneficiaryistreatedashavingpredeceasedonlyforpurposesofthetrustaffectedbythedisclaimerandnotforotherpurposesoftheinstrument.Forexample,inacreditshelter/QTIPtrustplanwithanup‐frontgifttothecreditsheltertrustandaresiduarygifttoaQTIPtrust,propertydisclaimedbythetrusteeofthecreditsheltertrustpassesdirectlyintotheQTIPtrustunderSection240.053(c),regardlessofthestatusandidentityoftheincomeandremainderbeneficiariesofthecreditsheltertrustandtheQTIPtrust.IfthesurvivingspouseisabeneficiaryofboththecreditsheltertrustandtheQTIPtrust,underSection240.053(c),heorsheistreatedashavingpredeceasedwithrespecttothecreditsheltertrustbut,underSection240.053(d),isnottreatedashavingpredeceasedwithrespecttotheQTIPtrust.Therefore,thesurvivingspouseisallowedtobeabeneficiaryoftheQTIPtrustnotwithstandingthedisclaimerbythetrusteeofthecreditsheltertrust.


Title TextofStatute Commentary240.054.DisclaimerofPowerofAppointmentorOtherPowerNotHeldinFiduciaryCapacity.

(a) If a holder disclaims a power ofappointment or other power not held in afiduciarycapacity,thissectionapplies.(b)Iftheholder:

(1)has not exercised the power, thedisclaimer takes effect as of the time theinstrument creating the power becomesirrevocable;or

(2)has exercised the power and thedisclaimerisofapowerotherthanapresentlyexercisablegeneralpowerofappointment,thedisclaimer takes effect immediately after thelastexerciseofthepower.(c)The instrument creating the power isconstrued as if the power had expired whenthedisclaimerbecameeffective.

240.055.DisclaimerbyAppointeeof,orObjectorTakerinDefaultofExerciseof,PowerofAppointment.

(a) Adisclaimerofan interest inpropertybyanappointeeofapowerofappointmenttakeseffect as of the time the instrument bywhichthe holder exercises the power becomesirrevocable.(b)Adisclaimerofan interest inpropertybyanobjectortakerindefaultofanexerciseofapower of appointment takes effect as of thetime the instrument creating the powerbecomesirrevocable.

240.056.DisclaimerofPowerHeldinFiduciaryCapacity.

(a) Ifapersondesignatedtoserveorservingasa fiduciarydisclaimsapowerheldortobeheld in a fiduciary capacity that hasnotbeenexercised,thedisclaimertakeseffectasofthetime the instrument creating the powerbecomesirrevocable.(b)Ifapersondesignatedtoserveorservingasa fiduciarydisclaimsapowerheldortobeheld in a fiduciary capacity that has beenexercised, the disclaimer takes effectimmediately after the last exercise of thepower.(c)A disclaimer subject to this section iseffective as to another person designated toserveorservingasafiduciaryif:

(1)the disclaimer provides that it iseffective as to another person designated toserveorservingasafiduciary;and

(2)the person disclaiming has theauthority to bind the estate, trust, or otherpersonforwhomthepersonisacting.


Title TextofStatute Commentary240.057.TaxQualifiedDisclaimer.

(a) In this section, "Internal Revenue Code"hasthemeaningassignedbySection111.004.(b)Notwithstanding any other provision ofthis chapter, if, as a result of a disclaimer ortransfer,thedisclaimedortransferredinterestistreatedundertheInternalRevenueCodeasnever having been transferred to thedisclaimant, the disclaimer or transfer iseffectiveasadisclaimerunderthischapter.

Thisisataxsavingscatch‐allprovision.EvenifadisclaimerwouldnototherwisebeeffectiveundertheTexasDisclaimerAct,ifadisclaimerisaqualifieddisclaimerforfederaltaxlawpurposes,itiseffectiveundertheTexasact.Forthisreason,thearenotax‐qualifieddisclaimerswhichfalloutsideoftheTexasDisclaimerAct,buttherearedisclaimerspermittedundertheTexasDisclaimerActwhicharenottax‐qualified.

240.058.PartialDisclaimerbySpouse.

Adisclaimerbyadecedent'ssurvivingspouseof an interest in property transferred as theresult of the death of the decedent is not adisclaimer by the surviving spouse of anyothertransfer fromthedecedenttoorforthebenefit of the surviving spouse, regardless ofwhether the interest that would have passedunder the disclaimed transfer passes becauseof the disclaimer to or for the benefit of thesurvivingspousebytheothertransfer.

Thissectionwascarriedoverfromformerlawsothatthereisnoquestionthatitcontinuestoapply.

240.101.DeliveryorFilingGenerally.

(a) Subjecttoapplicablerequirementsofthissubchapter, a disclaimant may deliver adisclaimer by personal delivery, first‐classmail, facsimile, e‐mail, or any other methodlikelytoresultinthedisclaimer'sreceipt.(b)If a disclaimer is mailed to the intendedrecipient by certified mail, return receiptrequested, at an address the disclaimant ingood faith believes is likely to result in thedisclaimer's receipt, delivery is considered tohave occurred on the date of mailingregardlessofreceipt.

Section240.101fixessomeoftheproblemswithdeliveryofadisclaimer.Deliverymethodsareexpansive,andSection240.101(b)importsagood‐faithmailboxrule.Ifthedisclaimerismailedtotheappropriatepersonbycertifiedmail,returnreceiptrequested,atanaddressthedisclaimantingoodfaithbelievesis“likelytoresultinthedisclaimer’sreceipt,”thedeliveryisconsideredtohaveoccurredonthedateofmailing(notthedateofreceipt),anditisconsideredtobedeliveredeveniftheintendedrecipientneverreceivesit.

240.102.DisclaimerofInterestCreatedUnderIntestateSuccessionorWill.

Inthecaseofaninterestcreatedunderthelawof intestate succession or an interest createdby will, other than an interest in atestamentarytrust:

(1)a disclaimermust be delivered to thepersonal representative of the decedent'sestate;or

(2)if no personal representative is thenserving, a disclaimer must be filed in theofficial public records of any county inwhichthedecedent:

(A)was domiciled on the date of thedecedent'sdeath;or

(B)ownedrealproperty.

Ifthereisapersonalrepresentativeofadecedent’sestate,thenthedisclaimermustbedeliveredtothepersonalrepresentativeanddoesnothavetobefiledanywhere.Ifthereisnopersonalrepresentativeofanestate(evenifthereisaprobateproceeding,suchastheprobateofawillasamunimentoftitleoradeterminationofheirship),thedisclaimerisfiledintheofficialpublicrecords(realpropertyrecords)ofanycountyinwhichthedecedentwasdomiciledatdeathorownedrealproperty.Filingintheprobateproceedingaccomplishesnothing.Ifthereisnopersonalrepresentative,thefilingrequirementiseither/or:itisnotnecessarytofileinthe


Title TextofStatute Commentarycountyofdomicileandinacountywhererealestateisowned;rather,thedisclaimantmayfileineither.Ifthedisclaimercoversrealpropertyinmorethanonecountyorpropertyotherthanrealproperty(suchastangibleorintangiblepersonalproperty),filinginanycountywhererealestateislocated(orinthecountyofdomicile)makesthedisclaimereffectiveforallpropertydescribedinthedisclaimer.

240.103.DisclaimerofInterestinTestamentaryTrust.

In the case of an interest in a testamentarytrust:(1)a disclaimer must be delivered to thetrusteethenserving;(2)if no trustee is then serving, a disclaimermust be delivered to the personalrepresentativeofthedecedent'sestate;or(3)ifnotrusteeorpersonalrepresentative isthenserving,adisclaimermustbefiledintheofficial public records of any county inwhichthedecedent:

(A)was domiciled on the date of thedecedent'sdeath;or

(B)ownedrealproperty.

Ifthepersonwishestodisclaimaninterestinatestamentarytrust,thedisclaimermustbedeliveredtothetrusteeifatrusteeisservingatthattime.Ifthereisnotrusteeserving(forexample,ifthetrusthasnotyetbeenfundedorthetrusteehasresigned),thedisclaimermustbedeliveredtothepersonalrepresentativeoftheestate.Ifthereisnopersonalrepresentativeortrustee,thedisclaimerisfiledintheofficialpublicrecords(realpropertyrecords)ofanycountyinwhichthedecedentwasdomiciledorownedrealproperty.Filingintheprobateproceedingaccomplishesnothing.Thefilingrequirementiseither/or:itisnotnecessarytofileinthecountyofdomicileandinacountywhererealestateisowned;rather,thedisclaimantmayfileineither.Ifthedisclaimercoversrealpropertyinmorethanonecountyorpropertyotherthanrealproperty(suchastangibleorintangiblepersonalproperty),filinginanycountywhererealestateislocated(orinthecountyofdomicile)makesthedisclaimereffectiveforallpropertydescribedinthedisclaimer.

240.104.DisclaimerofInterestinInterVivosTrust.

Inthecaseofaninterestinanintervivostrust:(1)a disclaimer must be delivered to thetrustee then serving, or, if no trustee is thenserving,adisclaimermustbefiled:

(A)with a court having jurisdiction toenforcethetrust;or

(B)in the official public records of thecountyinwhich:

(i)the situs of administration of thetrustismaintained;or

(ii)the settlor is domiciled or wasdomiciled on the date of the settlor's death;and(2)ifadisclaimerismadebeforethetimetheinstrument creating the trust becomesirrevocable,adisclaimermustbedeliveredtothe settlor of a revocable trust or thetransferoroftheinterest.

Forallintervivostrusts(revocableandirrevocable),thedisclaimermustbedeliveredtothetrustee,orifthereisnotrustee,thedisclaimermustbefiledwithacourthavingjurisdictiontoenforcethetrust(whichisn’tlikelytohappenunlessalawsuitinvolvingthetrustalreadyispending),orineither(1)thecountyofsitusofadministrationor(2)thecountywherethesettlorisdomicilediflivingorwasdomiciledatdeathifnotliving.Ifthetrustisrevocable,thedisclaimeralsomustbedeliveredtothesettlor.Thisisanextrarequirementforrevocabletrusts,notanalternativerequirement.


Title TextofStatute Commentary240.105.DisclaimerofInterestCreatedbyBeneficiaryDesignation.

(a) In this section, "beneficiary designation"means an instrument, other than aninstrument creating a trust, naming thebeneficiaryof:

(1)anannuityorinsurancepolicy;(2)an account with a designation for

paymentondeath;(3)a security registered in beneficiary

form;(4)a pension, profit‐sharing, retirement,

orotheremployment‐relatedbenefitplan;or(5)any other nonprobate transfer at

death.(b)In the case of an interest created by abeneficiary designation that is disclaimedbefore the designation becomes irrevocable,thedisclaimermustbedeliveredtothepersonmakingthebeneficiarydesignation.(c)In the case of an interest created by abeneficiarydesignationthatisdisclaimedafterthedesignationbecomesirrevocable:

(1)adisclaimerofaninterest inpersonalproperty must be delivered to the personobligatedtodistributetheinterest;and

(2)a disclaimer of an interest in realproperty must be recorded in the officialpublic records of the county where the realpropertythatisthesubjectofthedisclaimerislocated.

Section240.105(c)requiresrecordingadisclaimerintherealpropertyrecordsintheunusualcaseofadisclaimerofrealpropertypassingpursuanttoanirrevocablebeneficiarydesignation.Ifbeneficiarydesignationpropertyisdisclaimedbeforethedesignationbecomesirrevocable(usuallythismeansbeforethedeathofthepersonmakingthedesignation),thedisclaimermustbedeliveredtothepersonmakingthedesignation(forexample,theowneroftheinsurancepolicyorparticipantinaretirementplan),nottothethirdparty(forexample,theinsurancecompanyorplanadministrator)holdingthepropertysubjecttothebeneficiarydesignation.Ifthepropertyisdisclaimedafterthedesignationbecomesirrevocable(usuallythismeansafterthedeathofthepersonmakingthedesignation),thedisclaimermustbedeliveredtothepersonobligatedtodistributepersonalproperty(insurancecompany,planadministrator,etc.)orfiledinthecountywhererealpropertyislocated,ifthebeneficiarydesignationpropertyisrealproperty.Ifthepersonmakingthedisclaimerwishestodisclaimbenefitspassingbecauseofthedeathoftheinsured/participantfrommultiplepoliciesandretirementplans,disclaimersmustbedeliveredtomultiplerecipients–eachinsurancecompanyandplanadministrator.

240.106.DisclaimerbySurvivingHolderofSurvivorshipProperty.

Inthecaseofadisclaimerbyasurvivingholderofsurvivorshipproperty,thedisclaimermustbedeliveredtothepersontowhomthedisclaimedinterestpasses.

Section240.106istheonlysectionthatrequiresdeliveryofadisclaimertothepersontowhomthedisclaimedinterestpasses.Ifthedecedentandthedisclaimantweretheonlypartiestoasurvivorshipaccount,thenthedisclaimerwillcausethedisclaimedinteresttopasstothepersonalrepresentativeofthedecedent’sestate,sodeliverytothepersonalrepresentativeisrequired.Iftherewerethreeormorepartiestothesurvivorshipaccount,thenthedisclaimedinterestwouldpasstotheothersurvivingaccountowners,sodeliverytotheseaccountownersisrequired.Deliveringacopyofthedisclaimertothethirdpartyholdingthesurvivorshipproperty(bank,brokeragefirm,etc.)maybewiseforpracticalreasons,butitisnotsufficienttomakethedisclaimereffective.


Title TextofStatute Commentary240.107.DisclaimerbyObjectorTakerinDefaultofExerciseofPowerofAppointment.

Inthecaseofadisclaimerbyanobjectortakerin default of an exercise of a power ofappointmentat any timeafter thepowerwascreated:(1)the disclaimer must be delivered to theholderof thepoweror to the fiduciaryactingunder the instrument thatcreated thepower;or(2)if no fiduciary is then serving, thedisclaimermustbefiled:

(A)with a court having authority toappointthefiduciary;or

(B)in the official public records of thecounty in which the creator of the power isdomiciledorwasdomiciledonthedateofthecreator'sdeath.

240.108.DisclaimerbyCertainAppointees.

Inthecaseofadisclaimerbyanappointeeofanonfiduciarypowerofappointment:(1)the disclaimer must be delivered to theholder, the personal representative of theholder's estate, or the fiduciary under theinstrumentthatcreatedthepower;or(2)if no fiduciary is then serving, thedisclaimermustbefiled:

(A)with a court having authority toappointthefiduciary;or

(B)in the official public records of thecounty in which the creator of the power isdomiciledorwasdomiciledonthedateofthecreator'sdeath.

240.109.DisclaimerbyCertainFiduciaries.

In the case of adisclaimerby a fiduciary of apower over a trust or estate, the disclaimermust be delivered as provided by Section240.102, 240.103, or 240.104 as if thepowerdisclaimedwereaninterestinproperty.

240.110.DisclaimerofPowerbyAgent.

In the case of a disclaimer of a power by anagent, thedisclaimermustbedeliveredtotheprincipalortheprincipal'srepresentative.

240.111.RecordingofDisclaimer.

Ifan instrument transferringan interest inorpoweroverpropertysubjecttoadisclaimerisrequired or authorized by law to be filed,recorded,orregistered,thedisclaimermaybefiled, recorded, or registered as thatinstrument. ExceptasotherwiseprovidedbySection240.105(c)(2),failuretofile,record,orregister the disclaimer does not affect thedisclaimer's validity between the disclaimantandpersonstowhomthepropertyinterestorpowerpassesbyreasonofthedisclaimer.

Thisappliestodisclaimerswhicharerequiredorauthorizedbylawtobefiled,recordedorregistered.Section12.001ofthePropertyCodeprovidesthatanyinstrumentconcerningrealorpersonalpropertymayberecordedifithasbeenacknowledged.Ifthedisclaimerisacknowledged,itis“authorized”tobefiledbySection12.001.Doesthisgivethedisclaimantanalternativewaytomakeadisclaimereffective‐‐filingitinsteadofdeliveringittothepersonsentitledtoreceiveitunderother


Title TextofStatute CommentarysectionsofSubchapterC?Section240.009(a)(5)providesthat,tobeeffective,adisclaimermustbe“deliveredorfiledinthemannerprovidedbySubchapterC.”Itisclearthat(1)disclaimersdonothavetobefiledorrecordedinordertobeeffectiveexceptinspecificcircumstances;(2)inthosespecificcircumstances(suchaswhentheinterestpassesbyintestacyandthereisnopersonalrepresentativeoftheestate–seeSection240.102)disclaimersmustbefiledorrecordedinordertobeeffective;and(3)anydisclaimerispermittedtobefiledorrecordedifitisacknowledged.ItisnotclearthatfilingorrecordingadisclaimerthatothersectionsofSubchapterCsaymustbedeliveredtoapersonisasafealternativetothatdelivery.Thisapproachmaywork,butitmaynot,soitshouldnotbereliedupon.

240.151.WhenDisclaimerBarredorLimited.

(a)Adisclaimerisbarredbyawrittenwaiveroftherighttodisclaim.(b)A disclaimer of an interest in property isbarred if any of the following events occurbeforethedisclaimerbecomeseffective:

(1)the disclaimant accepts the interestsoughttobedisclaimedby:

(A)taking possession of the interest;or

(B)exercising dominion and controlovertheinterest;

(2)the disclaimant voluntarily assigns,conveys, encumbers, pledges, or transfers theinterest sought to be disclaimed or contractstodoso;or

(3)theinterestsoughttobedisclaimedissoldunderajudicialsale.(c)The acceptance of an interest in propertybyaperson in theperson's fiduciarycapacityis not an acceptance of the interest in theperson's individual capacity anddoesnot barthepersonfromdisclaimingtheinterestintheperson'sindividualcapacity.(d)A disclaimer, in whole or in part, of thefuture exercise of a powerheld in a fiduciarycapacityisnotbarredbythepreviousexerciseofthepower.(e)A disclaimer, in whole or in part, of thefuture exercise of a power not held in afiduciary capacity is not barred by theprevious exercise of the power unless the

Section240.151(b)(1)importsthedefinitionof“acceptance”ofadisclaimedinterestfromChapter122.Thisprovidescontinuityinthelaw.InTexas,acceptancecontinuestomeantakingpossessionofpropertyorexercisingdominionandcontrolofproperty.Acceptanceofpropertyasafiduciaryisnotacceptanceofthepropertyindividually.Forexample,ifthesurvivingspouseistheexecutorofthedeceasedspouse’sestate,thesurvivingspouseasexecutormaytakecontrolandpossessionofestatepropertywithoutprecludingalaterdisclaimerbythesurvivingspouseindividually,solongasheorshehasnotacceptedthepropertyindividually.Aswithpriorlaw,anattempteddisclaimerwhichisbarredbytheTexasDisclaimerActistreatedasanassignmenttothepersonorpersonswhowouldhavereceivedthepropertyifthedisclaimerhadbeeneffective.Insomestates,anineffectivedisclaimercausesthepropertytorevertbacktothedisclaimant.That’snottheruleinTexas.Adisclaimerbya“childsupportobligor”asdefinedinthestatuteisbarredonlyastodisclaimedpropertythatcouldbeappliedtosatisfythespecifiedchildsupportobligations.Ifthedisclaimantisnota“childsupport


Title TextofStatute Commentarypower is exercisable in favor of thedisclaimant.(f)Adisclaimerof:

(1)a power over property that is barredbythissectionisineffective;and

(2)an interest in property that is barredbythissectiontakeseffectasatransferoftheinterestdisclaimedtothepersonswhowouldhave taken the interest under Subchapter Bhadthedisclaimernotbeenbarred.(g)A disclaimer by a child support obligor isbarredastodisclaimedpropertythatcouldbeapplied to satisfy the disclaimant's childsupport obligations if those obligations havebeen:

(1)administratively determined by theTitle IV‐D agency as defined by Section101.033, Family Code, in a Title IV‐D case asdefinedbySection101.034,FamilyCode;or

(2)confirmedandreducedtojudgmentasprovidedbySection157.263,FamilyCode.(h)IfSubsection(g)applies,thechildsupportobligee towhomchildsupportarrearagesareowedmayenforcethechildsupportobligationagainst the disclaimant as to disclaimedproperty by a lien or by any other remedyprovidedbylaw.

obligor,”heorsheisnotaffectedanddoesnothavetoincludelanguageaboutthisinthedisclaimer.

These forms are for use by licensed Texas attorneys only. They are offered as is, without warranty of any kind. Use these forms at your own risk. The footnotes in the form offer guidance to the drafter and should be removed from the document before it is signed.

Disclaimer Forms Index

1. Disclaimer of interest in a decedent’s estate where a personal representative has been appointed

1.1. Mailed

1.1.1. Full disclaimer

1.1.2. Disclaimer of interest in specific asset

1.1.3. Formula disclaimer

1.2. Hand Delivered

1.2.1. Full disclaimer

1.2.2. Disclaimer of interest in specific asset

1.2.3. Formula disclaimer

2. Disclaimer of interest in a decedent’s estate where no personal representative has been appointed

2.1. Full disclaimer

2.2. Disclaimer of interest in specific asset

3. Disclaimer of interest by a trustee

3.1. Trustee’s notice of intent to disclaim

3.2. Waiver of trustee’s notice of intent to disclaim

Appendix 2 -- Disclaimer Forms

Disclaimer Form 1.1.1 Decedent’s estate with personal representative – mailed—full disclaimer

Disclaimer

______________________, 20___ [date of mailing] Certified Mail, Return Receipt Requested1 No. ____________________________ To: ______________________ [name of personal representative] ______________________ [address] ______________________ This disclaimer is delivered to you in your capacity as personal representative of the estate2 of ___________________________ [name of decedent], referred to in this disclaimer as the “Decedent.” I, _____________________________ [name of disclaimant], disclaim any and all right, title and interest in and to any property which I otherwise might be entitled to receive from Decedent’s estate by will or intestacy. This is a full disclaimer of all of my right, title and interest in any property or interest in property created by will or intestacy. [Add if appropriate. I do not disclaim my interest in _____________________ [describe interest in non-probate assets not being disclaimed – trust property, beneficiary designation property, survivorship property, etc.].3 _________________________________________ [signature of disclaimant]4

1 If the disclaimer is mailed by certified mail, return receipt requested, at an address believed in good faith to be likely to result in receipt, delivery is considered to have occurred on the date of mailing regardless of receipt. Tex. Prop. Code Sec. 240.101(b). Care should be taken to retain proof of mailing. 2 If a personal representative of the decedent’s estate is then serving, the disclaimer must be delivered to the personal representative. Tex. Prop. Code Sec. 240.102. 3 If non-probate assets also are being disclaimed, the disclaimer should be perfected by delivering the disclaimer to the appropriate person under Sections 240.103 – 240.110. Mentioning the disclaimer of these assets in the disclaimer delivered to the personal representative is unlikely to be sufficient to make the disclaimer effective. On the other hand, if the disclaimant is disclaiming property from the probate estate but accepting certain non-probate property, it probably is a good idea to mention this here to avoid confusion. 4 The disclaimant’s signature does not need to be notarized, see Tex. Prop. Code Sec. 240.009, unless it is to be recorded. If it is convenient to have the disclaimant’s signature notarized, there is no reason not to do so.


Disclaimer Form 1.1.2 Decedent’s estate with personal representative – mailed—specific asset

Disclaimer

______________________, 20___ [date of mailing] Certified Mail, Return Receipt Requested1 No. ____________________________ To: ______________________ [name of personal representative] ______________________ [address] ______________________ This disclaimer is delivered to you in your capacity as personal representative of the estate2 of ___________________________ [name of decedent], referred to in this disclaimer as the “Decedent.” I, _____________________________ [name of disclaimant], disclaim any and all right, title and interest in and to the following property or interest in property which I otherwise might be entitled to receive from Decedent’s estate by will or intestacy:

___________________________________ [describe specific asset or interest being disclaimed]

I am not disclaiming any other property or interest in property I might otherwise receive by will or intestacy from Decedent’s estate. _________________________________________ [signature of disclaimant]3

1 If the disclaimer is mailed by certified mail, return receipt requested, at an address believed in good faith to be likely to result in receipt, delivery is considered to have occurred on the date of mailing regardless of receipt. Tex. Prop. Code Sec. 240.101(b). Care should be taken to retain proof of mailing. 2 If a personal representative of the decedent’s estate is then serving, the disclaimer must be delivered to the personal representative. Tex. Prop. Code Sec. 240.102. 3 The disclaimant’s signature does not need to be notarized, see Tex. Prop. Code Sec. 240.009, unless it is to be recorded. If it is convenient to have the disclaimant’s signature notarized, there is no reason not to do so.


Disclaimer Form 1.1.3 Decedent’s estate with personal representative – mailed—pecuniary formula

Disclaimer

______________________, 20___ [date of mailing] Certified Mail, Return Receipt Requested1 No. ____________________________ To: ______________________ [name of personal representative] ______________________ [address] ______________________ This disclaimer is delivered to you in your capacity as personal representative of the estate2 of ___________________________ [name of decedent], referred to in this disclaimer as the “Decedent.” I, _____________________________ [name of disclaimant], disclaim a pecuniary amount3 of property or interest in property which I otherwise might be entitled to receive from Decedent’s estate by will or intestacy, determined as follows:

___________________________________ [include the formula provision defining the pecuniary amount being disclaimed]

I am not disclaiming any other property or interest in property I might otherwise receive by will or intestacy from Decedent’s estate. _________________________________________ [signature of disclaimant]4

1 If the disclaimer is mailed by certified mail, return receipt requested, at an address believed in good faith to be likely to result in receipt, delivery is considered to have occurred on the date of mailing regardless of receipt. Tex. Prop. Code Sec. 240.101(b). Care should be taken to retain proof of mailing. 2 If a personal representative of the decedent’s estate is then serving, the disclaimer must be delivered to the personal representative. Tex. Prop. Code Sec. 240.102. 3 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. Tex. Prop. Code Sec. 240.009(b). 4 The disclaimant’s signature does not need to be notarized, see Tex. Prop. Code Sec. 240.009, unless it is to be recorded. If it is convenient to have the disclaimant’s signature notarized, there is no reason not to do so.


Disclaimer Form 1.2.1 Decedent’s estate with personal representative – hand-delivered—full

disclaimer

Disclaimer

To: ______________________ [name of personal representative] ______________________ [address] ______________________ This disclaimer is delivered to you in your capacity as personal representative of the estate1 of ___________________________ [name of decedent], referred to in this disclaimer as the “Decedent.” I, _____________________________ [name of disclaimant], disclaim any and all right, title and interest in and to any property which I otherwise might be entitled to receive from Decedent’s estate by will or intestacy. This is a full disclaimer of all of my right, title and interest in any property or interest in property created by will or intestacy. [Add if appropriate. I do not disclaim my interest in _____________________ [describe interest in non-probate assets not being disclaimed – trust property, beneficiary designation property, survivorship property, etc.].2 _________________________________________ [signature of disclaimant]3 Receipt acknowledged on _______________________, 20__4 _________________________________________ [signature of personal representative] ______________________ [name of personal representative], Personal Representative of the Estate of _______________ [name of decedent]

1 If a personal representative of the decedent’s estate is then serving, the disclaimer must be delivered to the personal representative. Tex. Prop. Code Sec. 240.102. 2 If non-probate assets also are being disclaimed, the disclaimer should be perfected by delivering the disclaimer to the appropriate person under Sections 240.103 – 240.110. Mentioning the disclaimer of these assets in the disclaimer delivered to the personal representative is unlikely to be sufficient to make the disclaimer effective. On the other hand, if the disclaimant is disclaiming property from the probate estate but accepting certain non-probate property, it probably is a good idea to mention this here to avoid confusion. 3 The disclaimant’s signature does not need to be notarized, see Tex. Prop. Code Sec. 240.009, unless it is to be recorded. If it is convenient to have the disclaimant’s signature notarized, there is no reason not to do so. 4 A disclaimer may be delivered by personal delivery, first-class mail, facsimile, email or any other method likely to result in the disclaimer’s receipt. Tex. Prop. Code Sec. 240.101(a). If the certified mail safe harbor is not used (see Section 240.102(b)), then having the personal representative acknowledge receipt of the disclaimer is a way to assure compliance with the delivery requirement.


Disclaimer Form 1.2.2 Decedent’s estate with personal representative – hand-delivered— specific

asset

Disclaimer

To: ______________________ [name of personal representative] ______________________ [address] ______________________ This disclaimer is delivered to you in your capacity as personal representative of the estate1 of ___________________________ [name of decedent], referred to in this disclaimer as the “Decedent.” I, _____________________________ [name of disclaimant], disclaim any and all right, title and interest in and to the following property or interest in property which I otherwise might be entitled to receive from Decedent’s estate by will or intestacy:

___________________________________ [describe specific asset or interest being disclaimed]

I am not disclaiming any other property or interest in property I might otherwise receive by will or intestacy from Decedent’s estate. _________________________________________ [signature of disclaimant]2 Receipt acknowledged on _______________________, 20__3 _________________________________________ [signature of personal representative] ______________________ [name of personal representative], Personal Representative of the Estate of _______________ [name of decedent]

1 If a personal representative of the decedent’s estate is then serving, the disclaimer must be delivered to the personal representative. Tex. Prop. Code Sec. 240.102. 2 The disclaimant’s signature does not need to be notarized, see Tex. Prop. Code Sec. 240.009, unless it is to be recorded. If it is convenient to have the disclaimant’s signature notarized, there is no reason not to do so. 3 A disclaimer may be delivered by personal delivery, first-class mail, facsimile, email or any other method likely to result in the disclaimer’s receipt. Tex. Prop. Code Sec. 240.101(a). If the certified mail safe harbor is not used (see Section 240.102(b)), then having the personal representative acknowledge receipt of the disclaimer is a way to assure compliance with the delivery requirement.


Disclaimer Form 1.2.3 Decedent’s estate with personal representative – hand-delivered— pecuniary

formula

Disclaimer

To: ______________________ [name of personal representative] ______________________ [address] ______________________ This disclaimer is delivered to you in your capacity as personal representative of the estate1 of ___________________________ [name of decedent], referred to in this disclaimer as the “Decedent.” I, _____________________________ [name of disclaimant], disclaim a pecuniary amount2 of property or interest in property which I otherwise might be entitled to receive from Decedent’s estate by will or intestacy, determined as follows:

___________________________________ [include the formula provision defining the pecuniary amount being disclaimed]

I am not disclaiming any other property or interest in property I might otherwise receive by will or intestacy from Decedent’s estate. _________________________________________ [signature of disclaimant]3 Receipt acknowledged on _______________________, 20__4 _________________________________________ [signature of personal representative] ______________________ [name of personal representative], Personal Representative of the Estate of _______________ [name of decedent]

1 If a personal representative of the decedent’s estate is then serving, the disclaimer must be delivered to the personal representative. Tex. Prop. Code Sec. 240.102. 2 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. Tex. Prop. Code Sec. 240.009(b). 3 The disclaimant’s signature does not need to be notarized, see Tex. Prop. Code Sec. 240.009, unless it is to be recorded. If it is convenient to have the disclaimant’s signature notarized, there is no reason not to do so. 4 A disclaimer may be delivered by personal delivery, first-class mail, facsimile, email or any other method likely to result in the disclaimer’s receipt. Tex. Prop. Code Sec. 240.101(a). If the certified mail safe harbor is not used (see Section 240.102(b)), then having the personal representative acknowledge receipt of the disclaimer is a way to assure compliance with the delivery requirement.


Disclaimer Form 2.1 Decedent’s estate with no personal representative – full disclaimer

Disclaimer

Choose one of these three options:1 [Option 1 -- Will probated as muniment of title:] ________________________ [name of decedent], referred to in this disclaimer as the “Decedent,” died on or about ____________, ____ [date of death], and the Decedent’s will was admitted to probate as a muniment of title in Cause No. _________ in the ________________________ [name of court] of ____________ County, Texas. No personal representative is now serving with respect to the Decedent’s estate. [Option 2 – Estate proceeding but no current personal representative:] ____________________ [name of decedent], referred to in this disclaimer as the “Decedent,” died on or about ____________, ____ [date of death]. The Decedent’s estate was the subject of a proceeding in Cause No. _________ in the ________________________ [name of court] of ____________ County, Texas. No personal representative is now serving with respect to the Decedent’s estate. [Option 3 – No estate proceeding:] ________________________ [name of decedent], referred to in this disclaimer as the “Decedent,” died on or about ____________, ____ [date of death]. No personal representative is now serving with respect to the Decedent’s estate. Choose one of these two options:2 [Option 1 -- Domiciled in county:] The Decedent was domiciled in ___________ County, Texas, on the date of the Decedent’s death. [Option 2 – Owned real property in county:] The Decedent owned real property in _________ County, Texas. I, _____________________________ [name of disclaimant], disclaim any and all right, title and interest in and to any property which I otherwise might be entitled to receive from Decedent’s estate by will or intestacy. This is a full disclaimer of all of my right, title and interest in any property or interest in property created by will or intestacy.

1 If no personal representative is then serving, the disclaimer must be filed in the official public records of any county in which the decedent was domiciled on the date of death or owned real property. Tex. Prop. Code Sec. 240.102(2). The three most likely ways in which a personal representative would not be serving are (1) the will was probated as a muniment of title, (2) there was an estate proceeding but no personal representative is now serving, or (3) there was no estate proceeding. Although the statute does not require the disclaimer to include information about the estate proceeding, if there was an estate proceeding it is prudent to include information about it. 2 If there is no personal representative, the disclaimer may be filed in any county in which the decedent was domiciled on the date of death or owned real property. Tex. Prop. Code Sec. 240.102(2). It is not necessary to file in both places. Also, filing a disclaimer in a county where the decedent owned real property makes the disclaimer effective with respect to personal property wherever located and with respect to real property not located in that county.


Disclaimer Page 2

[Add if appropriate. I do not disclaim my interest in _____________________ [describe interest in non-probate assets not being disclaimed – trust property, beneficiary designation property, survivorship property, etc.].3 Dated _________________________, 2015. _________________________________________ [signature of disclaimant]

Acknowledgment4 The State of Texas County of _____________ This instrument was acknowledged before me on ________________, 20___, by __________________________ [name of disclaimant]. ________________________________________ [Seal] Notary Public, State of Texas After recording, return to: [name and address]

3 If non-probate assets also are being disclaimed, the disclaimer should be perfected by delivering the disclaimer to the appropriate person under Sections 240.103 – 240.110. Mentioning the disclaimer of these assets in the disclaimer filed in the official public records is unlikely to be sufficient to make the disclaimer effective. On the other hand, if the disclaimant is disclaiming property from the probate estate but accepting certain non-probate property, it probably is a good idea to mention this here to avoid confusion. 4 An instrument concerning real or personal property may be recorded if it has been acknowledged, sworn to with a proper jurat, or proved according to law. Tex. Prop. Code Section 12.001(a).


Disclaimer Form 2.2 Decedent’s estate with no personal representative – specific asset

Disclaimer

Choose one of these three options:1 [Option 1 -- Will probated as muniment of title:] ________________________ [name of decedent], referred to in this disclaimer as the “Decedent,” died on or about ____________, ____ [date of death], and the Decedent’s will was admitted to probate as a muniment of title in Cause No. _________ in the ________________________ [name of court] of ____________ County, Texas. No personal representative is now serving with respect to the Decedent’s estate. [Option 2 – Estate proceeding but no current personal representative:] ____________________ [name of decedent], referred to in this disclaimer as the “Decedent,” died on or about ____________, ____ [date of death]. The Decedent’s estate was the subject of a proceeding in Cause No. _________ in the ________________________ [name of court] of ____________ County, Texas. No personal representative is now serving with respect to the Decedent’s estate. [Option 3 – No estate proceeding:] ________________________ [name of decedent], referred to in this disclaimer as the “Decedent,” died on or about ____________, ____ [date of death]. No personal representative is now serving with respect to the Decedent’s estate. Choose one of these two options:2 [Option 1 -- Domiciled in county:] The Decedent was domiciled in ___________ County, Texas, on the date of the Decedent’s death. [Option 2 – Owned real property in county:] The Decedent owned real property in _________ County, Texas. I, _____________________________ [name of disclaimant], disclaim any and all right, title and interest in and to the following property or interest in property which I otherwise might be entitled to receive from Decedent’s estate by will or intestacy:

1 If no personal representative is then serving, the disclaimer must be filed in the official public records of any county in which the decedent was domiciled on the date of death or owned real property. Tex. Prop. Code Sec. 240.102(2). The three most likely ways in which a personal representative would not be serving are (1) the will was probated as a muniment of title, (2) there was an estate proceeding but no personal representative is now serving, or (3) there was no estate proceeding. Although the statute does not require the disclaimer to include information about the estate proceeding, if there was an estate proceeding it is prudent to include information about it. 2 If there is no personal representative, the disclaimer may be filed in any county in which the decedent was domiciled on the date of death or owned real property. Tex. Prop. Code Sec. 240.102(2). It is not necessary to file in both places. Also, filing a disclaimer in a county where the decedent owned real property makes the disclaimer effective with respect to personal property wherever located and with respect to real property not located in that county.


Disclaimer Page 2

___________________________________ [describe specific asset or interest being disclaimed]3

I am not disclaiming any other property or interest in property I might otherwise receive by will or intestacy from Decedent’s estate. Dated _________________________, 2015. _________________________________________ [signature of disclaimant]

Acknowledgment4 The State of Texas County of _____________ This instrument was acknowledged before me on ________________, 20___, by __________________________ [name of disclaimant]. ________________________________________ [Seal] Notary Public, State of Texas After recording, return to: [name and address]

3 Even if the asset being disclaimed is not located in a county where the decedent was domiciled or owned real property, the only way to meet the delivery and filing requirements for an asset passing by will or intestacy when there is no personal representative then serving is to file in one of those counties. 4 An instrument concerning real or personal property may be recorded if it has been acknowledged, sworn to with a proper jurat, or proved according to law. Tex. Prop. Code Section 12.001(a).


Disclaimer Form 3.1 Trustee’s notice of intent to disclaim

[Trustee’s letterhead]

______________, 20___ [date of notice]1 Certified Mail, Return Receipt Requested2 No. ____________________________ To: ______________________ [name of beneficiary]3 ______________________ [address] ______________________ Re: Trustee’s notice of intent to disclaim Dear __________________ [name of beneficiary]: I am the trustee of the ______________________________ [name of trust], referred to in this notice as the “Trust.” You are a current beneficiary or presumptive remainder beneficiary of the Trust. This notice is being given to you in accordance with Section 240.0081 of the Texas Property Code.

1. In my capacity as trustee of the Trust, I intend to disclaim all right, title and interest in and to the following described property (referred to in this notice as the “Property”):4

1 The notice must be given not later than the 30th day before the date the disclaimer is made. Tex. Prop. Code Sec. 240.0081(f)(5). The statute does not specify if the 30 days is measured from the date of the notice or the date of receipt. 2 The notice may be sent by personal delivery, first-class mail, facsimile, e-mail, or any other method likely to result in the notice’s receipt. Tex. Prop. Code Sec. 240.0081(f)(6). Unlike the delivery requirements for disclaimers (see Tex. Prop. Code Sec. 240.101(b)), there is no safe harbor for certified mail. Therefore, the safest practice would be to collect the acknowledgments of receipt of certified mail and use the latest of these as the beginning of the 30-day period. 3 The trustee must give notice to current beneficiaries and presumptive remainder beneficiaries. These terms are defined in Tex. Prop. Code Sec. 240.002. In addition, notice must be given to the attorney general if a charity is a beneficiary or potential beneficiary. Tex. Prop. Code Sec. 240.0081(c). If the beneficiary is has a court-appointed guardian or conservator, the notice must be given to the guardian or conservator. If a minor beneficiary has no court appointed guardian or conservator, the notice must be given to a parent of the minor. Tex. Prop. Code Sec. 240.0081(d). The notice does not have to be given to a beneficiary who waives notice (see Form 3.2), who is not known to the trustee, who is known to the trustee but cannot be located after reasonable diligence, or who is a descendant of a beneficiary to whom the trustee has given notice if they have similar interests and no apparent conflict of interest. Tex. Prop. Code Sec. 240.0081(e). 4 Tex. Prop. Code Section 240.0081(f)(1)(A) and 240.0081(f)(2).


Trustee’s Notice of Intent to Disclaim Page 2

[describe property or interest to be disclaimed]

2. If I make the disclaimer, the Property will not become trust property and will not be available to distribute to you from the Trust.5

3. You have the right to object to the disclaimer.6

4. You may petition a court to approve, modify, or deny the disclaimer.7

5. The earliest date I intend to make the disclaimer is ________________, 20___ [date of intended disclaimer].8

6. My name and mailing address is:9

_________________________ [name of trustee] _____________________________ [mailing address of trustee]

Optional: I intend to make this disclaimer because ______________________ [state reasons for disclaimer]. Optional: If you have questions, need additional information or wish to discuss this matter, please contact me. _________________________________________ [signature of trustee] _____________________________ [name of trustee], Trustee of the _____________________________ [name of trust]

5 Tex. Prop. Code Section 240.0081(f)(1)(B). 6 Tex. Prop. Code Section 240.0081(f)(1)(C). 7 Tex. Prop. Code Section 240.0081(f)(1)(D). 8 Tex. Prop. Code Section 240.0081(f)(3). The earliest date stated in the notice should not be earlier than 30 days after the date of the notice. As a practical matter, the earliest date for the disclaimer will be the date stated here or 30 days after the last notice is given, whichever is later. 9 Tex. Prop. Code Section 240.0081(f)(4).


Disclaimer Form 3.2 Waiver of trustee’s notice of intent to disclaim

Waiver of Notice I, ______________________________ [name of beneficiary], hereby waive the requirement of notice under Section 240.0081 of the Texas Property Code of the intention of ____________________ [name of trustee], trustee of the ________________________ [name of trust], to disclaim the following described property which otherwise may pass into the trust:

[describe property or interest to be disclaimed]

[Optional: Include acknowledgments of receipt of material information, understanding the effect of the disclaimer, etc.].1

[Use extreme caution about including a release.].2 _________________________________________ [signature of beneficiary] [name of beneficiary]

Acknowledgment3 The State of Texas County of _____________ This instrument was acknowledged before me on ________________, 20___, by __________________________ [name of beneficiary]. ________________________________________ [Seal] Notary Public, State of Texas

1 Section 240.0081 of the Property Code does not require the beneficiary waiving notice to acknowledge receipt of material information or understanding the effect of the disclaimer, but the trustee may wish to have these acknowledgments for the trustee’s protection. 2 Caution: While some trustees may wish to include a release, the release may be deemed to be consideration received by the trustee for making the disclaimer, which could make the disclaimer ineffective for tax purposes. In order for the release to be effective, the beneficiary must be acting on full information in order for the release to be effective. Tex. Prop. Code Sec. 114.005. 3 Section 240.0081 of the Property Code does not require the waiver to be notarized, but the trustee may wish to require an acknowledgment for his or her protection.


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