What is a Disclaimer?

            A disclaimer can be used as a post-mortem planning tool for many individuals.  Put simply, a disclaimer is a beneficiary’s unqualified refusal of a power or interest in property.  For example, someone may choose to disclaim a piece of property if they do not want to pay the taxes on that item. 

Previously, many people (even some attorneys!) did not how to correctly use a disclaimer to help their clients with all of their estate planning needs.  However, because of the new disclaimer legislation passed in 2004, the use of disclaimers is expanding even more.  Virginia finally joined some other states in adopting the Uniform Disclaimer of Property Interest Acts.  Virginia’s adoption of this Act expands the potential uses of disclaimers and allows people to make a valid disclaimer under state law much easier. 


Who May Disclaim in Virginia?

            Unless limited by law or the document that creates the fiduciary relationship, a fiduciary may disclaim any interest in or power over property.  Disclaimers are even allowed if the document that creates the property interest has a specific clause that places a restriction on the beneficiary’s right to disclaim.  Additionally, a custodial parent of a minor child may also disclaim property on behalf of the child.  Again, the parent can make a disclaimer even if a spendthrift clause or similar restriction on the right to disclaim is included in the estate-planning document. 


How to Make a Valid Disclaimer in Virginia:

            In order to be effective, there are certain requirements for a disclaimer in Virginia.  These requirements are as follows:

  1. The disclaimer must be in writing or some other record
  2. The writing must declare the disclaimer
  3. The writing must describe the interest or power being disclaimed
  4. The writing must be signed by the person making the disclaimer; and
  5. The writing must be delivered or filed in the manner provided by Virginia Code Section 64.1-196.11. 

While Virginia’s prior disclaimer statute contained a nine-month time limitation, the new Disclaimer Act does not have a time limitation for making a disclaimer.  However, if the disclaimer is made for tax purposes, it must still be filed within the nine-month time period dictated by Section 2518 of the Internal Revenue Code. 


Further, under Virginia’s new Act, a disclaimer will be barred under the following circumstances:

  1. Where the disclaimant makes a written waiver of the right to disclaim
  2. Where the disclaimer is barred or limited by other law in Virginia; or
  3. Where any of the following events occur before the disclaimer becomes effective: the disclaimant accepts the interest sought to be disclaimed; the disclaimant voluntarily assigns, conveys, encumbers, pledges, or transfers the interest sought to be disclaimed or contracts to do so; or a judicial sale of the interest sought to be disclaimed occurs. 


If the disclaimer is barred under Virginia law, it is ineffective and the property disclaimed will pass to the people who would have received the property if the disclaimer had not been barred.  However, if the disclaimer is valid under Virginia law, but found to be invalid for tax purposes, the disclaimer is ignored for the tax purposes, and the person making the disclaimer will be treated like he or she received the property that is being disclaimed. 


Where to Deliver or File the Disclaimer:

Under the new disclaimer act in Virginia, the disclaimer must be delivered or filed in order to be considered effective.  Delivery can be done by personal delivery, first class mail, or any other method that is likely to result in its receipt.  Once a disclaimer is delivered or filed according to a proper method (outlined in Virginia Code Section 64.1-196.11), it becomes irrevocable. 


Intestate Estate/Will: In the case of an interest created under the law of intestate succession or an interest created by will, a disclaimer should be delivered to the personal representative of the decedent’s estate.  If there is no personal representative, the disclaimer should be filed with a court that has the jurisdiction to appoint a personal representative. 

Testamentary Trust: In the case of a testamentary trust, a disclaimer should be delivered to the person who is currently serving as trustee of the trust.  If there is no trustee for the estate, the disclaimer should be delivered to the personal representative of the decedent. 

Inter Vivos Trust: If there is an interest in an inter vivos trust, the disclaimer should be delivered to the trustee.  However, if there is no trustee currently serving, the disclaimer should be delivered to the court that has jurisdiction to enforce the trust.  If the disclaimer is made before the time the instrument creating the trust becomes irrevocable, the disclaimer should be delivered to the settlor of a revocable trust or the transferor of the interest. 

Joint Property: In the case of a disclaimer by a surviving holder of jointly held property, the disclaimer shall be delivered to the person to whom the disclaimed interest passes. 


Overall, Virginia’s new Disclaimer Act, expands the availability and applicability of disclaimer planning.  Since there are many nuances to the new act, it is important to have the assistance of an attorney who knows all of the ins and outs of the Virginia Disclaimer Act.  If you would like to discuss the Virginia Disclaimer Act with an attorney and determine how this Act may affect you or your family, call Smith Strong at (804) 325-1245 or (757) 941-4298.  

H. Van Smith
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Trusted Virginia Attorney Serving Richmond to Williamsburg