Delaware General Assembly

CHAPTER 302

FORMERLY

SENATE BILL NO. 313

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:

Section 1. Amend Title 12, Delaware Code, by deleting Chapter 6 thereof in its entirety and substituting in lieu thereof the following:

This Chapter may be cited as the “Delaware Disclaimer Act.”

In this Chapter, unless the context otherwise requires:

(1) ‘Beneficiary designation’ means a testamentary or nontestamentary instrument or contract, other than an instrument creating a trust, naming the beneficiary of:

(a) an annuity or insurance policy;

(b) an account with a designation for payment on death;

(c) a security registered in beneficiary form;

(d) a pension, profit-sharing, retirement, or other employment-related benefit plan; or

(e) any other non-probate interest in property with a designation for transfer on death.

(2) ‘Code’ means the Internal Revenue Code of 1986, as amended (26 U.S.C. §§ 1, et seq.), or the comparable provisions of any later law.

(3) ‘Disclaimant’ means the person to whom a disclaimed interest in property would have passed had the disclaimer not been made, or the person who would have had a power over property or with respect to property, including a power of appointment, had the disclaimer not been made.

(4) ‘Disclaimed interest’ means the interest that would have passed to the disclaimant had the disclaimer not been made.

(5) ‘Disclaimed power’ means the power that the disclaimant would have had over property in the nature of a power of appointment with respect to an interest in property or any other power that a disclaimant could have exercised with respect to property had the disclaimer not been made.

(6) ‘Disclaimer’ means the refusal to accept an interest in or power over property.

(7) ‘Fiduciary’ means a personal representative, trustee of a trust, agent acting under a power of attorney, conservator, custodian under a Uniform Transfers to Minors Act or similar statute of any jurisdiction, guardian, or other person authorized to act as a fiduciary with respect to the property or power of another person.

(8) ‘Holder’ means the person holding a power of appointment over an interest in property held in a trust, or holding a power over a trust, who is granted the right or authority to exercise the power of appointment over an interest in property held in a trust or of a power over a trust under the terms of the instrument governing the trust.

(9) ‘Jointly held property’ means property held in the name of two or more persons under an arrangement in which all owners have concurrent interests and under which the last surviving owner is entitled to the whole of the property. The term ‘jointly held property’ specifically includes a tenancy by the entirety, and an “owner” shall include a tenant by the entirety.

(10) ‘Person’ means an individual, living, deceased or unborn, ascertained or unascertained, corporation, business trust, statutory trust, estate, trust, partnership, limited liability company, association, joint venture, public corporation, government, or any governmental subdivision, agency, or instrumentality, or any other legal or commercial entity.

(11) ‘This State’ means the State of Delaware, and "state" means a State of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States. The term includes an Indian tribe or band, or Alaskan native village, recognized by federal law or formally acknowledged by a State.

(12) ‘Trust’ means:

(a) an express trust, charitable or noncharitable, with additions thereto, whenever and however created; and

(b) a trust created pursuant to a statute, judgment, or decree which requires the trust to be administered in the manner of an express trust.

§603. Scope; Property Subject to Disclaimer.

This Chapter applies to disclaimers of any interest in or power over property, whenever created, and whether any interest in or power over property is disclaimed at the time of the creation of the interest in or power over property, or at any time thereafter as provided hereafter in this Chapter.

§ 604. Chapter Supplemented by Other Law; Chapter Not Exclusive.

§ 605. Power to Disclaim; Requisites and Execution; When Irrevocable.

(a) A person may disclaim, in whole or part, any interest in or power over property, including a power of appointment. A person may disclaim the interest or power notwithstanding any limitation under the terms of the instrument creating the interest in property or granting a power to the holder in the nature of a spendthrift provision or similar restriction on transfer or a restriction or limitation on the right to disclaim.

(b) Except to the extent that a fiduciary’s right to disclaim is expressly restricted or limited by another statute of this State or by the instrument creating the fiduciary relationship a fiduciary may disclaim, in whole or part, any interest in or power over property, including a power of appointment, whether acting in a personal or in a fiduciary capacity. A fiduciary may disclaim an interest in property or power notwithstanding any limitation on the interest or power of the disclaimant in the nature of a spendthrift provision or similar restriction on transfer or a restriction or limitation on the disclaimant’s right to disclaim under the instrument creating the interest or power in the disclaimant (which is distinct from the instrument creating the fiduciary relationship).

(c) To be effective, the disclaimer shall:

(1) Be in a writing;

(2) Declare the disclaimer and the extent thereof;

(3) Describe the interest or power disclaimed;

(5) Be delivered in the form and in the manner provided in Section 612.

(f) A disclaimer made under this Chapter is not a transfer, assignment or release by the disclaimant.

§ 606. Disclaimer of interest in property.

(a) Except for a disclaimer governed by Section 607 or Section 608, the following rules apply to a disclaimer of an interest in property:

(1) If the interest was created by an instrument, the disclaimer takes effect as of the time the instrument creating the interest becomes irrevocable, and the disclaimed interest passes as follows:

(A) If the instrument creating the interest includes a provision providing for the disposition of the interest, if the interest is disclaimed, or of disclaimed interests in general, the interest passes according to the provisions in the instrument governing the disposition of the disclaimed interest.

(B) If the instrument creating the interest does not include a provision described in subparagraph (1)(A), if the disclaimant is an individual, the disclaimed interest passes as if the disclaimant had died immediately before the time of distribution, and if the disclaimant is not an individual, the disclaimed interest passes as if the disclaimant did not exist at the time of distribution.

(C) If the disclaimant is an individual, and if, by law or under the provisions of the instrument creating the interest, the descendants of the disclaimant, or the descendants of any other individual, if applicable, would share in the disclaimed interest by any method of representation had the disclaimant died immediately before the time of distribution, the disclaimed interest passes only to the descendants of the disclaimant, or the descendants of the other applicable individual, who survive the time of distribution.

(2) If the interest in property being disclaimed arose under the law of intestate succession, the disclaimer takes effect as of the time of the intestate’s death.

(3) If a disclaimant disclaims an interest in property preceding the future interest(s) of any person or persons in such property:

(A) A future interest held by a person other than the disclaimant takes effect as if the disclaimant had died or ceased to exist immediately before the time of distribution.

(B) A future interest in the property held by the disclaimant that the disclaimant retained when disclaiming the preceding interest will not accelerate the disclaimant’s possession or enjoyment of the future interest retained by the disclaimant.

(b) For the purposes of this Section:

(1) “Time of distribution” means the time when a disclaimed interest would have taken effect in possession or enjoyment.

(2) “Future interest” means an interest that takes effect in possession or enjoyment, if at all, later than the time of the creation of the interest.

§607. Disclaimer of Rights of Survivorship in Jointly Held Property.

(a) Upon the death of an owner of jointly held property:

(1) If, during the deceased owner’s lifetime, the deceased owner could

have unilaterally reacquired a portion of the property attributable to the deceased owner’s contributions without the consent of the other owner(s), a surviving owner may disclaim, in whole or in part, a fractional share of that portion of the property attributable to the deceased owner’s contribution determined by dividing the number one by the number of joint owners alive immediately after the death of the owner to whose death the disclaimer relates.

(2) For all other jointly held property, an owner who survives a deceased owner may disclaim, in whole or part, a fraction of the whole of the property the numerator of which is one (1) and the denominator of which is the product of (i) the number of joint owners alive immediately before the death of the owner to whose death the disclaimer relates; multiplied by (ii) the number of joint owners alive immediately after the death of the owner to whose death the disclaimer relates.

(b) A disclaimer under subsection (a) takes effect as of the death of the owner of jointly held property to whose death the disclaimer relates.

(c) An interest in jointly held property disclaimed by a surviving owner of the property passes as if the disclaimant predeceased the owner to whose death the disclaimer relates.

(d) Disclaimers of interests in property not governed by this Section are governed by Section 606.

§608. Disclaimer of Interest by Trustee.

Except as limited by Section 3324(a)of this title, if a trustee disclaims an interest in property, as authorized under Section 3325(1) of this title, that otherwise would have become trust property, the interest does not become trust property.

§ 609. Disclaimer of Power Held in Fiduciary Capacity.

If a holder who is a fiduciary disclaims a power held in a fiduciary capacity, the following rules apply:

(a) If the fiduciary holder has not previously exercised the power held in a fiduciary capacity the disclaimer of the power takes effect as of the time the instrument creating the power becomes irrevocable.

(b) If the fiduciary holder has previously exercised the power held in a fiduciary capacity the disclaimer of the power takes effect immediately after the last exercise of the power.

(c) A disclaimer under this Section is effective as to another fiduciary and is binding upon the estate, trust or other person for whom the fiduciary is acting as limited by Delaware law unless otherwise stated within the instrument.

§ 610. Disclaimer of Power of Appointment or Other Power Not Held in Fiduciary Capacity.

If a holder that is not a fiduciary disclaims a power of appointment, whether such power is a general power of appointment or a power that is not a general power of appointment, or other power over a trust, granted to the non-fiduciary holder under the terms of an instrument, the following rules apply:

(a) If the holder has not previously exercised the power of appointment or the power over a trust, the disclaimer of a power of appointment or a power over a trust by a holder takes effect as of the time the instrument granting the power to the holder became or becomes irrevocable.

(b) If the holder has previously exercised a general power of appointment and the disclaimer is of the right to exercise such general power of appointment, whether or not the holder presently has the power to exercise such general power of appointment, the disclaimer of such power of appointment takes effect immediately after the last time the holder exercised such general power of appointment.

(c) If the holder has previously exercised a power of appointment and the disclaimer is of a power of appointment that is not a general power of appointment, whether or not the holder presently has the power to exercise such power of appointment, the disclaimer of such power of appointment takes effect immediately after the last time the holder exercised such power of appointment.

(d) If the holder has previously exercised a power over a trust and the disclaimer is of a power over a trust, whether or not the holder presently has the power to exercise such power over the trust, the disclaimer of the power over a trust takes effect immediately after the last time the holder exercised such power over the trust.

(e) The instrument granting the power of appointment or power over the trust to the holder shall be construed as if the power of the holder ceased to exist with respect to the power of appointment or power over the trust when the disclaimer became effective.

§ 611. Disclaimer by Appointee, Permissible Appointee, or Taker in Default of Exercise of Power of Appointment.

(a) A disclaimer of an interest in property by an appointee of such interest in property as a result of an exercise of a power of appointment by a holder takes effect as of the time the instrument by which the holder exercised the power becomes irrevocable.

§ 612. Delivery and Recording Requirements.

(a) Subject to subsections (b) through (k), delivery of a disclaimer may be effected by personal delivery, first-class mail, or any other method likely to result in its receipt, subject to the following:

(1) A disclaimer is considered as delivered to the person to whom such disclaimer is required to be delivered, if the method of delivery of the disclaimer would be considered delivered on the date by which it would be considered a timely mailing and treated as a timely filing if the disclaimer were a return or other document required to be filed within a prescribed period or on or before a prescribed date under the Code and would be considered to be timely filed under the provisions of Section 7502 of the Code, or the comparable provisions of any later law, and the regulations promulgated thereunder.

(2) If two or more persons or fiduciaries are acting as a person or fiduciary to whom a disclaimer is required to be delivered under subsections (b) through (k), delivery of such disclaimer shall be made on all such persons or fiduciaries.

(b) In the case of an interest created under the law of intestate succession or an interest created by will, other than an interest in a testamentary trust:

(1) a disclaimer must be delivered to the personal representative of the decedent’s estate, if one is then serving; and

(2) it must also be delivered to the court in the county in which proceedings for administration of the estate of a deceased transferor of the property or interest or a deceased donee of the power have been commenced or could be commenced.

(c) In the case of an interest in a testamentary trust:

(1) a disclaimer must be delivered to the trustee then serving, or if no trustee is then serving, to the personal representative of the decedent’s estate; and

(2) it must also be delivered to the court in the county in which proceedings for administration of the estate of a deceased transferor of the property or interest or a deceased donee of the power have been commenced or could be commenced.

(d) In the case of an interest in an inter vivos trust:

(1) a disclaimer must be delivered to the trustee then serving; or

(2) if no trustee is then serving, it must be delivered to the court having jurisdiction to enforce the trust.

(3) If the disclaimer is made before the time the instrument creating the trust becomes irrevocable, it must be delivered to the settlor of a revocable trust or the transferor of the interest.

(e) In the case of an interest created by a beneficiary designation made before the time the designation becomes irrevocable, a disclaimer must be delivered to the person making the beneficiary designation.

(f) In the case of an interest created by a beneficiary designation made after the time the designation becomes irrevocable, a disclaimer must be delivered to the person obligated to distribute the interest.

(g) In the case of a disclaimer by a surviving owner of jointly held property the disclaimer must be delivered to the person or persons to whom the disclaimed interest passes.

(h) In the case of a disclaimer by a permissible appointee or a taker in default of the exercise of a power of appointment at any time after the power was created:

(1) the disclaimer must be delivered to the holder of the power or to the fiduciary acting under the instrument that created the power; or

(2) if no fiduciary is then serving, it must be delivered to a court having jurisdiction to appoint the fiduciary.

(i) In the case of a disclaimer by an appointee of a nonfiduciary power of appointment:

(1) the disclaimer must be delivered to the holder, the personal representative of the holder’s estate or to the fiduciary under the instrument that created the power; or

(2) if no fiduciary is then serving, it must be delivered to a court having jurisdiction to appoint the fiduciary.

(j) In the case of a disclaimer by a fiduciary of a power over a trust or estate, the disclaimer must be delivered as provided in subsection (b), (c), or (d), as if the power disclaimed were an interest in property.

(k) In the case of a disclaimer of a power by an agent or attorney-in-fact, the disclaimer must be delivered to the principal or the principal’s representative.

(l) No fiduciary, person or entity having custody of the disclaimed interest shall be liable for any otherwise proper distribution made without actual notice of the disclaimer, or, if the disclaimer is barred under Section 614, for any otherwise proper distribution made in reliance of the disclaimer, if the distribution is made without actual knowledge of the facts constituting the bar of the right to disclaim.

(m) For purposes of this Section, when delivery of a disclaimer to a court is referenced, the disclaimant may fulfill this requirement by filing the disclaimer with the Register of Wills or the Register in Chancery for the county in which proceedings for administration of the estate of a deceased transferor of the property or interest, a deceased donee of the power or a deceased joint tenant has been commenced.

(n) A copy of the disclaimer may also be delivered to the person or persons entitled to the property or interest in the event of disclaimer; however, failure to make such delivery shall not affect the validity of the disclaimer. Such delivery is in addition to and not in lieu of the delivery and recording otherwise required under this Section.

§ 613. Disclaimers Affecting Real Property.

If the property interest being disclaimed is an interest in real property, the disclaimer shall be acknowledged in the manner provided for deeds of real property. The disclaimer shall not be valid as against any person, except the beneficiary, the heirs and devisees of the beneficiary, and any other person having actual notice of the disclaimer, unless an original thereof, or an attested copy thereof if the original is required to be filed elsewhere, is recorded in the office for recording of deeds for the county or district in which the real property is located.

§ 614. When Disclaimer Barred or Limited.

(a) A disclaimer is barred by a written waiver of the right to disclaim.

(b) A disclaimer of an interest in property is barred if any of the following events occur before the disclaimer becomes effective:

(1) the disclaimant accepts the interest sought to be disclaimed;

pledges, or transfers the interest sought to be disclaimed or contracts to do so;

(3) a judicial sale of the interest sought to be disclaimed occurs.

(c) A disclaimer is barred or limited if so provided by law other than this Chapter.

(d) A disclaimer, in whole or part, of the future exercise of a power held in a fiduciary capacity is not barred by its previous exercise.

(e) A disclaimer of a power over property which is barred by this Section is ineffective. A disclaimer of an interest in property which is barred by this Section takes effect as a transfer of the interest disclaimed to the persons who would have taken the interest under this Chapter had the disclaimer not been barred.

§ 615. Tax Qualified Disclaimer.

Notwithstanding any other provision of this Chapter, if as a result of a disclaimer or transfer the disclaimed or transferred interest is treated pursuant to the provisions of the Code, and the regulations promulgated thereunder, as never having been transferred to the disclaimant, then the disclaimer or transfer is effective as a disclaimer under this Chapter.

§ 616. Application to Existing and Expired Relationships.

(a) Except as otherwise provided in Section 614, an interest in or power over property existing on the effective date of this Chapter as to which the nine (9) months for receipt or filing a disclaimer under Delaware law superseded by this Chapter has not expired may be disclaimed after the effective date of this Chapter.

(b) Any interest in or power over property that has expired under Delaware law superseded by this Chapter prior to the effective date of this Chapter shall remain expired.

§ 617. Severability Clause.

If any provision of this Chapter or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this Chapter which can be given affect without the invalid provision or application, and to this end the provisions of this Chapter are severable.”

Section 2. Effective Date.

Sections 601 through 617 of this Chapter shall be effective immediately upon the date of enactment.