A. A disclaimer of an interest in property by an appointee of a power of appointment takes effect as of the time the instrument by which the holder exercises the power becomes irrevocable.
B. A disclaimer of an interest in property by an object or taker in default of an exercise of a power of appointment takes effect as of the time the instrument creating the power becomes irrevocable.
History: Laws 2001, ch. 290, § 10; 1978 Comp., § 46-10-10 recompiled as § 45-2-1110 by Laws 2011, ch. 124, § 101.
ANNOTATIONSRecompilations. — Laws 2011, ch. 124, § 101 recompiled former 46-10-10 NMSA 1978 as 45-2-1110 NMSA 1978, effective January 1, 2012.
COMMENT
This section governs disclaimers by those who may or do receive an interest in property through the exercise of a power of appointment. At the time of the creation of a power of appointment, the creator of the power, besides giving the power to the holder of the power, can also limit the objects of the power (the permissible appointees of the property subject to the power) and also name those who are to take if the power is not exercised, persons referred to as takers in default.
This section provides rules for disclaimers by all of these persons: subsection (a) is concerned with a disclaimer by a person who actually receives an interest in property through the exercise of a power of appointment, and subsection (b) recognizes a disclaimer by a taker in default or permissible appointee before the power is exercised. These two situations are quite different. An appointee is in the same position as any devisee or beneficiary of a trust. He or she may receive a present or future interest depending on how the holder of the power exercises it. Subsection (a) therefore, makes the disclaimer effective as of the time the instrument exercising the power-giving the interest to the disclaimant-becomes irrevocable. If the holder of the power created an interest in the appointee, the effect of the disclaimer is governed by Section 2-1106. If the holder created another power in the appointee, the effect of the disclaimer is governed by Section 2-1109 [45-2-1109 NMSA 1978].
Example 1. Mother's will creates a testamentary trust for daughter D. The trustees are to pay all income to D for her life and have discretion to invade principal for D's maintenance. On D's death she may appoint the trust property by will among her then living descendants. In default of appointment the property is to be distributed by representation to D's descendants who survive her. D is the donee, her descendants are the permissible appointees and the takers in default. D exercises her power by appointing the trust property in three equal shares to her children A, B, and C. The three children are the appointees. A disclaims. Under subsection (a) A's disclaimer is effective as of D's death (the time at which the will exercising the power became irrevocable). Because A disclaimed an interest in property, the effect of the disclaimer is governed by Section 2-1106(b) [45-2-1106 NMSA 1978]. If D's will makes no provisions for the disposition of the interest should it be disclaimed or of disclaimed interests in general (Section 2-1106(b)(2)), the interest passes as if A predeceased the time of distribution which is D's death. An appointment to a person who is dead at the time of the appointment is ineffective except as provided by an antilapse statute. See Restatement, Second, Property (Donative Transfers) §18.5. The Restatement, Second, Property (Donative Transfers), §18.6 suggests that any requirement of the antilapse statute that the deceased devisee be related in some way to the testator be applied as if the appointive property were owned either by the donor or the holder of the power. (See also Restatement, Third, Property (Wills and Other Donative Transfers) §5.5, Comment l.) That is the position taken by Section 2-603. Since antilapse statutes usually apply to devises to children and grandchildren, the disclaimed interest would pass to A's descendants by representation.
A taker in default or a permissible object of appointment is traditionally regarded as having a type of future interest. See Restatement, Second, Property (Donative Transfers) §11.2, Comments c and d. The future interest will come into possession and enjoyment when the question of whether or not the power is to be exercised is resolved. For testamentary powers that time is the death of the holder.
Subsection (b) provides that a disclaimer by an object or taker in default takes effect as of the time the instrument creating the power becomes effective. Because the disclaimant is disclaiming an interest in property, albeit a future interest, the effect of the disclaimer is governed by Section 2-1106. The effect of these rules is illustrated by the following examples.
Example 2(a). The facts are the same as Example 1, except A disclaims before D's death and D's will does not exercise the power. Under subsection (b) A's disclaimer is effective as of Mother's death which is the time when the instrument creating the power, Mother's will, became irrevocable. Because A disclaimed an interest in property, the effect of the disclaimer is governed by Section 2-1106(b) [45-2-1106 NMSA 1978]. If Mother's will makes no provision for the disposition of the interest should it be disclaimed or of disclaimed interests in general (Section 2-1106(b) (2)), the interest passes and under Section 2-1106(b) (3) as if the disclaimant had died immediately before the time of distribution. Thus, A is deemed to have died immediately before D's death which is the time of distribution. If A actually survives D, the disclaimed interest is one-third of the trust property; it will pass as if A predeceased D, and the result is the same as in Example 1. If A does predecease D he would have received nothing and there is no disclaimed interest. The disclaimer has no effect on the passing of the trust property.
Example 2 (b). The facts are the same as in Example 2 (a) except D does exercise her power of appointment to give one-third of the trust property to each of her three children, A, B, and C. A's disclaimer means the disclaimed interest will pass as if he predeceased D and the result is the same as in Example 1.
In addition, if all the objects and takers in default disclaim before the power is exercised the power of appointment is destroyed. See Restatement, Second, Property (Donative Transfers) §12.1, Comment g.