Case Law Update: Disclaimers

A trust beneficiary may disclaim a portion of future income stream

The life income beneficiary of a spendthrift trust attempted to disclaim a portion of future income payments. The trial court held the disclaimer invalid because the beneficiary had accepted the interest sought to be disclaimed.

In In re S.H. Bowman Trust, 804 N.W.2d 361 (Minn. Ct. App. 2011), the Minnesota intermediate appellate court reversed. Under the Uniform Disclaimer of Property Interests Act as enacted in Minnesota, a beneficiary may disclaim an interest if the disclaimer is not barred by prior law or by the UDPIA. The court held that because of the spendthrift restriction, the disclaimant’s interest was not “indefeasibly fixed in quality” and therefore the time to disclaim had not expired and that the disclaimer was not barred because the disclaimant had not accepted the portion of the interest she sought to disclaim.

Special thanks to William P. LaPiana (Rita and Joseph Solomon Professor of Wills, Trusts,and Estates, New York Law School) for sending me this case law update.