Often times in Florida we see heirs or beneficiaries who realize that they have a share of a probate estate but for their own estate planning purposes, for taxes or for continued qualifications for medical benefits or other reasons don’t want to take the probate assets. Instead, they seek to simply pass those assets to their own heirs or other beneficiaries. Florida has a mechanism for taking a pass on Probate assets and its called the “Florida Uniform Disclaimer of Property Interests Act.” The relevent law is codified in Florida Statute Chapter, 739 and begins with section 101.
Fla. Stat. 739.104(1) Provides:
A person may disclaim, in whole or in part, conditionally or unconditionally, any interest in or power over property, including a power of appointment. A person may disclaim the interest or power even if its creator imposed a spendthrift provision or similar restriction on transfer or a restriction or limitation on the right to disclaim. A disclaimer shall be unconditional unless the disclaimant explicitly provides otherwise in the disclaimer.
Disclaimers can be useful for inheritance issues in Florida. Florida law allows a person to disclaim interests in Probate and in some circumstances can help a debtor avoid paying their share of an inheritance to creditors. To be effective, the disclaimer must be in writing, witnessed and recorded in the same manner as a deed and the original must be filed. Fla. Stat. 739.104(3). For that reason, make sure that if you are looking at a disclaimer of probate property interest that you consult with an attorney to make sure the document complies with the requirements of Florida law.
Some estate planning documents dealing with specific property may contain specific instructions for disclaimed property and if so those instructions apply. Otherwise, Florida has a default way to treat disclaimed property dealt with in Fla. Stat. 739.201 which provides:
If the disclaimant is an individual, the disclaimed interest passes as if the disclaimant had died immediately before the interest was created, unless under the governing instrument or other applicable law the disclaimed interest is contingent on surviving to the time of distribution, in which case the disclaimed interest passes as if the disclaimant had died immediately before the time for distribution. However, if, by law or under the governing instrument, the descendants of the disclaimant would share in the disclaimed interest by any method of representation had the disclaimant died before the time of distribution, the disclaimed interest passes only to the descendants of the disclaimant who survive the time of distribution.
If the disclaimant is not an individual, the disclaimed interest passes as if the disclaimant did not exist.
So if you’re an individual disclaiming an interest in Florida property the Courts will treat your disclaimer to allow succession of the asset as though you pre-deceased the decedent. If however you are disclaiming for a corporation/business or other non-individual recipient, the disclaimed interest passes as though thte entity not even exist.
For individuals, that means that you need to understand the rules of intestate succession if there is no will and if the deceased did have a valid will, make sure you understand the implications of disclaiming your probate property interest.
In some circumstances a disclaimer is not effective. The disclaiming party must not accept the interest before executing the disclaimer and similarly the disclaiming party cannot assign or transfer his or her interest prior to disclaiming. The full list of restrictions on conveyance is codified in Fla. Stat. 739.402 which provides:
(1) A disclaimer is barred by a written waiver of the right to disclaim.
(2) A disclaimer of an interest in property is barred if any of the following events occur before the disclaimer becomes effective:
(a) The disclaimant accepts the interest sought to be disclaimed;
(b) The disclaimant voluntarily assigns, conveys, encumbers, pledges, or transfers the interest sought to be disclaimed or contracts to do so;
(c) The interest sought to be disclaimed is sold pursuant to a judicial sale; or
(d) The disclaimant is insolvent when the disclaimer becomes irrevocable.
(3) A disclaimer, in whole or in part, of the future exercise of a power held in a fiduciary capacity is not barred by its previous exercise.
(4) A disclaimer, in whole or in part, of the future exercise of a power not held in a fiduciary capacity is not barred by its previous exercise unless the power is exercisable in favor of the disclaimant.
(5) A disclaimer of an interest in, or a power over, property which is barred by this section is ineffective.
Because the disclaimer must be drafted to comply with the statute, recorded and executed properly and also because you must fully understand the implications of a disclaimer, it is important that you speak with an attorney regarding the implications of your disclaimer before attempting to do so. If done correctly a disclaimer may allow an heir or beneficiary to avoid serious tax, creditor debts and maintain income qualification for health benefits.