Trusts: future interests

Question 1

Disclaimer

Answer 1

Almost all states have enacted statutes that permit beneficiaries to disclaim their interest in trust property.

In most states, a disclaimer is not effective unless it is reduced to writing within nine months after a future interest would become “indefeasibly vested.”

Question 2

Disclaimer: income beneficiary

Answer 2

If an income beneficiary disclaims her interest, the trust principal becomes immediate distributable (accelerates) to the remainder beneficiaries of the trust if the remainder is vested.

if the remainder is contingent upon a condition, however, the remainder will not accelerate.

Question 3

Disclaimer: future interests

Answer 3

When the holder of a future interest effectively disclaims that interest, the disclaimant is deemed to have predeceased the life tenant.

Question 4

Lapse

Answer 4

(1) Majority rule:

In most states, anti-lapse statutes do not apply to nonprobate gifts such as trusts.

Thus, if a gift to issue fails by reason of non-survival of the issue, then then the children and further descendants of the deceased issue will not take under the trust.

(2) Minority rule and Uniform Probate Code

In some states, a substitute gift is created in the descendants of the deceased issue.

Even words of survivorship—e.g., ‘to those of my issue who are still living”—will not cut off this substitute gift.

Question 5

Gifts to children and their issue: common law

Answer 5

Unless the governing instrument provides otherwise, the common law general rule is that a gift to one’s child fails if the child predeceases the time of distribution.

Thus, the surviving issue of a deceased child does not take.

Question 6

Gifts to children and their issue: Uniform Probate Code

Answer 6

Under the UPC, If a child who survives the settlor but then predeceases the time of distribution has surviving issue, that issue would have a right to the parent’s share of the gift.