2.1 Uniform Disclaimer of Property Interests Act
Effective October 1, 2004, Maryland adopted the Uniform Disclaimer of Property Interests Act (“MUDOPIA”). It largely tracks the uniform act promulgated by the National Conference of Commissioners on Uniform State Laws (“NCCUSL”) in 1999 as amended in 2002. The uniform act “was drafted to allow the full range of disclaimers recognized under the Internal Revenue Service Code (“IRC)” Section 2518.” LaPiana, “Some Property Law Issues in the Land of Disclaimers,” 38 Real Prop., Prob. & Trust J., 207, 209 (Summer 2002) (hereinafter “LaPiana”).
2.1.1 Although designed to take advantage of all of the possibilities under IRC § 2518, it purposefully “decoupled” the statute from the nine-month required of IRC § 2518 and, or course, prior Maryland law. See Est. & Trusts § 9-202 of the pre-October 1, 2004 statute. The decoupling was “designed to reduce confusion” by signaling that a tax qualified disclaimer had to qualify under the § 2518 rules which, in the case of disclaimers of future interests, had to be made within nine months of the creation of the interest. The earlier versions of the uniform acts (including Est. & Trusts § 9-202) authorized disclaimers within nine months of when the contingent interest was finally ascertained and the disclaimant’s right to possession or enjoyment became indefeasibly vested. “The removal of all mention of time limits will clearly signal the practitioner that the requirements for a tax qualified disclaimer are set by different law.” Comment, Prefatory Note, UDOPIA (2002).
188.8.131.52 Other than for federal tax liens, a disclaimer is not a transfer for fraudulent conveyance purposes in most jurisdictions. Essen v. Gilmore, 607 N.W.2d 829, 835 (Neb. 2000) (“A review of the jurisprudence of other states shows that it is the majority view that a renunciation under the applicable state probate code is not treated as a fraudulent transfer of assets under the Uniform Fraudulent Transfer Act (“UFTA”), and creditors of the person making the renunciation cannot claim any rights to the renounced property in the absence of an express statutory provision to the contrary.”). Also see, Pauw v. Agee, 2000 U.S. Dist. LEXIS 22323 (U.S. Dist. Ct. for S.C. 2000), which permitted a debtor to disclaim his inheritance then rent the property back from his brother who received the property due to the operation of the disclaimer: “This view (that a disclaimer will defeat the judgment against the debtor/disclaimant) corresponds with the majority view that a creditor cannot prevent a debtor from disclaiming an inheritance.” [at 19].
184.108.40.206 One court used the “encumbers” provision, however, to trump the “relation back” provision to permit a creditor’s lien to operate to bar the disclaimer. That decision, Pennington v. Bigham, 512 So. 2d 1344 (Ala. 1987), turned on the direct interest an heir has in estate property. As in Maryland for decedents dying before January 1, 1970, real estate in Alabama directly passes to intestate heirs: “When John Thomas Bigham died intestate on June 25, 1986, the legal title to a one-half interest in his real property vested eo instanti in Bobby Bigham (the disclaimant); however, it vested subject to the statutory power of the administratrix to take possession of it and obtain an order to have it sold for payment of the debts of his father’s estate.” Pennington at 1345-46. In Pennington, a judgment creditor had perfected her lien against all of the disclaimant’s property before the disclaimant’s father died. Thus, the lien acted as an encumbrance of the disclaimant’s share. The Supreme Court of Alabama held that a disclaimer after the lien attached under the circumstances of that case constituted a fraudulent conveyance.
220.127.116.11 There is no decision in Maryland (other than for Medicaid purposes, discussed below) that addresses the operation of the “relation back” provision under prior law, or the “not a transfer, assignment, or release” provisions under the current act. MUDOPIA § 9-203(f)(1); prior act § 9-205; Comment, Section 5, UDOPIA: “Subsection (f) restates the long standing rule that a disclaimer is a true refusal to accept and not an act by which the disclaimant transfers, assigns, or releases the disclaimed interest. This subsection states the effect and meaning of the traditional ‘relation back’ doctrine of prior Acts.”
2.1.2 Like in Pennington, Maryland has a provision barring disclaimers if the property to be disclaimed is encumbered. Unlike Pennington, Maryland Est. & Trusts § 1-301(a) reversed the common law rule passing real property directly to the heirs by providing that: “All property of a decedent shall be subject to the estates of decedent’s law, and upon the person’s death shall pass directly to the personal representative, who shall hold legal title for administration and distribution, without any distinction, preference, or priority between real and personal property.” This is the Maryland rule for all decedents dying on or after January 1, 1970. An existing lien operating against the disclaimant of a Maryland estate would therefore not attach to the disclaimed property unless the property was actually distributed to him/her.
18.104.22.168 Perhaps more telling, however, is the language of the Maryland statute under the current act and its predecessor. Section 9-202(f)(2) of the MUDOPIA states: “Creditors of the disclaimant have no interest in the property disclaimed.” This comports with the prior statute: “Creditors of the disclaimant have no interest in the property or interest disclaimed, whether their claims are based on contract, tort, tax obligations, or otherwise.”