On my previous two blog posts, we have been discussing disclaimers, or renunciations as they are known under New York State law.
The first article provided an overview of disclaimer trust planning (click here to read), and the second introduced the concept of partial disclaimers and renunciations (click here to read).
Today, I want to continue the discussion about partial disclaimers. There are several different types of partial disclaimers/renunciations. To understand them (and disclaimers/renunciations in general), it is critical to know what qualifies as separate interests and severable property, what a partial disclaimer/renunciation is, and which solution (including which type of partial disclaimer/renunciation) may be best for you, given your particular financial and legal circumstances.
Separate Interest in Property
A beneficiary can disclaim all or a portion of any separate interest in a property, even if the disclaimant has another interest in the same property. Each interest in a property that is separately created by the transferor can, and will, be treated as a separate interest. Disclaiming separate interests can be complex, but very effective for tax, creditor, and asset transfer planning in certain situations.
Severable Property
Severable property is property which can be divided into separate parts. Each part, once severed, will maintain a complete and independent existence from the other parts. A disclaimant can disclaim a separate interest in a property if the disclaimer relates to severable property. An example may be shares of a corporation. The disclaimant may accept some shares while making a qualified disclaimer on the remaining shares.
Disclaimer of Undivided Portion
As stated, a disclaimant may disclaim an undivided portion of a separate interest in property that meets the requirements of a qualified disclaimer/renunciation. The undivided portion must consist of a fraction of a percentage of each and every substantial interest or right owned by the disclaimant in the property. It must also extend over the entire term of the disclaimant’s interest in such property, and in other property in which that property is converted.
Disclaimer of a Pecuniary Amount
A pecuniary or nonpecuniary bequest or gift may also be eligible for a qualified disclaimer/renunciation (partial or full). A segregation of assets from the portion of the gift/bequest not disclaimed must be made on the basis of the fair market value of the assets on the date of the disclaimer.
As you can see, given these requirements, all disclaimers can be complex, and partial disclaimers can be even more complicated to make. However, they can be very beneficial if they can help decrease tax liabilities, avoid creditor issues, or pass on the property benefits to the next heir(s) in line.
There are many situations where a full or partial disclaimer may make the most sense. It is important to work with an experienced attorney who understands estate planning and disclaimer trust planning. You want to make sure everything is done right for a proper (that is, to realization of a “qualified”) disclaim or renunciation.
To learn more about this subject or to discuss your specific estate situation, contact me today and let us determine the best legal solution for you and your family.
