SENATE BILL REPORT

SHB 1169

BYHouse Committee on Judiciary (originally sponsored by Representatives Padden, Crane, Tate and P. King) 

Regulating disclaimers of interest by beneficiaries.

House Committe on Judiciary

Senate Committee on Law & Justice

Senate Hearing Date(s):March 16, 1989

Majority Report:  Do pass.

      Signed by Senators Pullen, Chairman; McCaslin, Vice Chairman; Hayner, Madsen, Nelson, Newhouse, Niemi, Rasmussen, Talmadge, Thorsness.

Senate Staff:Joyce Ansley (786-7418)

                  March 16, 1989

AS REPORTED BY COMMITTEE ON LAW & JUSTICE, MARCH 16, 1989

BACKGROUND:

For various reasons, including unwanted tax consequences, a person may choose not to accept a gift.  Since 1973, Washington has had a disclaimer of interest statute that provides a formal method for the rejection of an interest.  In 1976, the federal tax code was amended with respect to the formal requirements for a disclaimer under federal law.  Some of the current state law uses outdated terminology, including references to the now repealed state inheritance tax.

The disclaimer of interest statute applies to transfers of interests both during the lifetime of the transferring party and upon the death of the transferring party.  However, the bulk of the procedural content of the statute deals with transfers upon death.  There is little explicit direction about the disclaimer of inter vivos transfers (transfers during a person's lifetime).  The current law also requires that a disclaimer of an interest received through a will must be filed with the clerk of the court, and that the disclaimer of an interest in real property must be recorded.

The disclaimer of interest statute contains two general prohibitions against disclaiming an interest.  First, an insolvent beneficiary may not disclaim an interest.  Second, a beneficiary may not disclaim an interest if he or she has signed a waiver of disclaimer or has already voluntarily assigned or otherwise disposed of the right to his or her interest.

SUMMARY:

The disclaimer of interest statute is completely rewritten and reorganized.  Obsolete references, including the reference to the repealed state inheritance tax, are removed.

The statute is amended to make it clear that interests received by an inter vivos transfer may be disclaimed.  An explicit nine month period is provided for disclaiming an interest following an inter vivos transfer.  The filing of disclaimers of testamentary interests and the recording of disclaimers of interests in real property are made optional.

An express provision is added to make it clear that once an interest has been accepted by a beneficiary, it cannot be disclaimed.  The prohibition against disclaimers by insolvent beneficiaries is removed.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

Senate Committee - Testified: Mike Carrico, WSBA Tax Section, Estate and Gift Tax Committee (pro); D. L. Cooper, Department of Revenue