Perhaps some typical examples should illustrate when a disclaimer may be important:

1. A person who is ill with an estate likely to be taxed who does not need the inheritance. By disclaiming, the person next in line in the Will or Trust can use the money.
2. A person who wishes to claim a 50 percent community property interest where the claimant is to receive twenty percent under a Will.
3. A person facing personal bankruptcy and wishes the money to pass directly to his or her children, next in line, and never to vest in him or her.
4. Occasionally a person has serious creditor problems. California law expressly provides that the disclaimer is binding on creditors and does not constitute a fraudulent conveyance. (Prob C §§ 281, 283.) However, it has been held that a disclaimer does not defeat federal tax liens. Notwithstanding federal tax liens, there may be occasions when a beneficiary with other creditor problems wishes to disclaim an inheritance if the disclaimer results in property passing to the beneficiary's children or other objects of the beneficiary's affection. The disclaimer may be ineffective, however, when a beneficiary becomes entitled to an inheritance within 180 days after petitioning for bankruptcy and the inheritance would otherwise become part of the bankruptcy estate. 11 USC § 541(a)(5)(A).
5. A minor wishes to disclaim an inheritance.

There are literally hundreds of other examples of when disclaimer may make sense for a person to consider.

California Medi-Cal and Inheritance

When mistakes are made concerning inheritances and Medi-Cal (California’s Medicaid program), the cost can become significant and costly. When a person is drawing Medi-Cal benefits and inherits money or property, that inheritance may jeopardize the benefits. An inheritance must be handled carefully to minimize expensive penalties. The best idea is to call an experienced Medi-Cal consultant and especially before any inheritance becomes a problem.

The Basics

1. Form Requirements:

   The disclaimer shall be in writing, and shall be signed by the disclaimant, and shall:

   (a) Identify the creator of the interest.
   (b) Describe the interest to be disclaimed.
   (c) State the disclaimer and the extent of the disclaimer.

2. Time Requirements:

   (a) In the case of any of the following interest, under California law, the disclaimer must be made within a "reasonable time" after the disclaimant acquired knowledge of the transfer, although 9 months is deemed reasonable as a matter of law. Prob C §279:

   (1) An interest created under a will.
   (2) An interest created by interstate succession.
   (3) An interest created pursuant to the exercise or non-exercise of a testamentary power or appointment.
   (4) An interest created by surviving the death of a depositor of a Totten trust account or P.O.D. account.
   (5) An interest created under a life insurance of annuity contract.
   (6) An interest created by surviving the death of another joint contract.
   (7) An interest created under am employee benefit plan.
   (8) An interest created under an individual retirement account, annuity or bond.
   
   

   (b) In the case of an interest created by a living trust, an interest created by the exercise of a presently exercisable power of appointment, an outright inter vivos gift, a power of appointment, or an interest created or increased by succession to a disclaimed interest, a disclaimer is conclusively presumed to have been filed within a reasonable time if it is filed within nine months after whichever of the following times occur latest:

   (1) the time of the creation of the trust, the exercise of the power of appointment, the making of the gift, the creation of the power of appointment, or the disclaimer of the disclaimed property.
   (2) The time of the first knowledge of the interest is acquired by the person able to disclaim.
   (3) The time the interest becomes indefeasibly vested.
   
   

   (c) In case of an interest not described in subdivision (a) or (b), a disclaimer is conclusively presumed to have been filed within a reasonable time if it is filed within nine months after whichever of the following times occur later:

   (1) Nine months after the time the interest becomes an estate in possession.
   (2) The time specified in subdivision (b), (c), or (d), whichever is applicable.
   
   

   If the disclaimer is not filed within the time provided in subdivision (a), (b), (c), or (d), above, the disclaimant has the burden of establishing that the disclaimer was filed within a reasonable time after the disclaimant acquired knowledge of the interest.

   Note that this does not mean the disclaimer cannot be established. It means that it is no longer conclusively presumed to be valid and the burden of demonstrating the “reasonableness” of the timing of the disclaimer is upon the person asserting the disclaimer.

   The person contesting the reasonableness will, of course, depend on the property interests at stake. It could be the Trustee; the executor; family members-or the taxing authorities.

3. How To File:

   A disclaimer may be filed with the trustee, personal representative, other fiduciary or person responsible for distributing the interest to the beneficiary.

The Disclaimer Effect

A disclaimer, when effective, is irrevocable and binding upon the beneficiary and all persons claiming by, through, or under the beneficiary, including creditors of the beneficiary. Keep this in mind: one cannot change one’s mind once the disclaimer is achieved and once it is achieved, the effect is usually equivalent to the person who otherwise would have received the asset never having received the asset in any manner.

Conclusion

Please contact me if you are involved with the death of a person with or without a Will. You can reach me by phone at (760) 989-4820 or through my online contact form. I handle probate matters in all California counties, including Southern California Counties, such as Imperial County, Los Angeles County, Orange County, Riverside County, San Bernardino County, and San Diego County. I also represent parties residing outside of California that have probate matters affecting real and/or personal property in California.