Disclaimer Law

A Call for Statutory Reform

For most of us, the receipt of a gift-either through a will, inter vivos transfer, or otherwise-is a welcome occurrence. But a gift to some individuals creates undesirable consequences. Whether to avoid waiting creditors, a federal tax lien, or to reduce one\'s overall tax liability, recipients often turn to disclaimer law to avoid the negative consequences of a gratuitous transfer of property. By invoking the disclaimer, the individual keeps the property in \"friendly\" hands and out of the coffers of creditors or the government.A tension accompanies disclaimer law that places the interests of personal autonomy at odds with creditors\' rights and the efficient running of a governmental tax system. In other areas of law, such as bankruptcy, this tension is normally resolved against the individual. Disclaimer law, however, has traditionally placed absolute control over acceptance of a gift in the hands of the individual. Creditors and the government are thus left with no recourse.Recognizing that disclaimer law principles contradict traditionally accepted policy goals, courts have begun to alter the application of disclaimer law to shift the balance away from the individual. Most notably, the U.S. Supreme Court determined that a federal tax lien immediately attaches to gifted property, preempting any attempt by the individual to invoke state disclaimer law to avoid the tax lien.In his note, Andrew Bender examines the courts\' departure from common-law disclaimer principles. Although Mr. Bender concludes that disclaimer law needs to be altered in order to achieve broad policy objectives and consistency with bankruptcy and fraudulent transfer law, he disagrees with the judicial approach. Rather, he contends that a legislative solution is necessary, and better suited, to resolve the numerous inconsistencies that result from judicial action.

The full text of this Note is available to download as a PDF.