What is a Will Disclaimer?

A will disclaimer is a beneficiary’s legally binding refusal of a gift under a will. The rationale behind the will disclaimer is to recognize that no one can be compelled to receive a gift.

State laws differ in their disclaimer requirements. In general, it must be in a writing signed by the disclaimant describing the interest that is to be disclaimed. A copy of the disclaimer should be provided to the executor of the estate. Once made, a disclaimer is irrevocable. However, disclaimers are not effective if the beneficiary has already accepted the benefits of the property.

Why would someone want to disclaim a gift under a will? Disclaimers are made primarily for tax reasons. Disclaimers may also be made when the burdens of the property outweigh its benefits (such as a loan or mortgage exceeding the property’s value). Disclaimers can also be made to prevent creditors from filing claims against the property (except in the case of valid federal tax liens).

The disclaimant is treated as if he or she had predeceased the decedent and the property is distributed to the next eligible taker. The disclaimant can NOT direct the property to go to someone else of the disclaimant’s choosing.

THE PARTIES TO A TRUST

There are three parties to a trust:

● Settlor: the person that sets up the trust and contributes property to the trust.

● Trustee: the person that manages the property placed in the trust.

● Beneficiary: the person that ultimately receives the property from the trust.

Although a trust involves three parties, it does not require three people. The settlor and the trustee can be the same person. In addition, the settlor and the beneficiary can be the same person. If there is more than one trustee and/or more than one beneficiary, one person can be both a trustee and beneficiary.

However, if there is only one trustee and one beneficiary, the trustee and the beneficiary can NOT be the same person. This is because a trust requires a division of legal ownership (held by the trustee) and equitable ownership (held by the beneficiary). If the sole trustee is also the sole beneficiary, the "merger doctrine" applies (i.e. the legal and equitable ownership interests merge), thereby terminating the trust.

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Per Stirpes vs. Per Capita

Per stirpes and per capita are common terms in wills and trusts to describe how a deceased person's estate is to be distributed.

Under the per stirpes distribution method, if a beneficiary predeceases the decedent, that beneficiary’s descendants will take the share of the estate to which their parent would have been entitled.

For example, assume the decedent (whom we will call X) has 3 children (A, B, and C), all of whom receive 1/3 of X's estate. But if A predeceases X and A had two children (D and E), B and C will receive 1/3 while D and E will equally share the other 1/3 (i.e. D & E each receive 1/6).

Under the per capita distribution method, if a beneficiary predeceases the decedent, that beneficiary’s share would pass to the other beneficiaries (NOT to the descendants).

For example, assume again X's 3 children (A, B, and C) are each entitled to receive 1/3. But if A predeceases X , B and C will receive 1/2. A's children (D and E) will receive nothing.

If you have questions about your will or your will is in need of an update, please contact us and speak to one of our professionals.