[WSBAPT] Can a disclaimer shield assets from creditors?

[Sara Longley]

Hello listmates,

Here is your Friday afternoon head-scratcher.

Washington's disclaimer statute, RCW 11.86, allows an estate beneficiary to disclaim any interest and states (11.86.041(1)) that such disclaimed interest shall pass as if the beneficiary had died immediately prior to the date of the transfer of the interest.  In effect, it is as if the beneficiary never had a right to the disclaimed property.

My question: where an estate beneficiary is a defendant in a personal injury lawsuit at the time Decedent dies, can the beneficiary shield his inheritance from a later-entered judgment in favor of the tort plaintiffs by disclaiming it?

My hypothetical client is the alternate beneficiary who would inherit the estate property should the primary beneficiary disclaim it.  Will this hypothetical client be free of liability to the primary beneficiary's judgment creditors?

I have reviewed several bankruptcy court cases in which a disclaimer is held to be effective to shelter disclaimed estate assets from bankruptcy creditors where the bankruptcy is filed after the disclaimer.  However, they all depend on the bankruptcy code's reference to state law, which in turn brings in state-authorized disclaimers.  I have also read a Tax Court case which holds that a disclaimer is NOT effective to shield disclaimed assets from a tax lien in existence at the time the disclaimer is made, which rests its holding on the Internal Revenue Code's reference to federal, not state, law: because the IRC does not specifically exempt disclaimed property from collection, such property is deemed available to satisfy a tax debt.

My case is neither bankruptcy nor tax.  The events resulting in the ongoing lawsuit occurred prior to the Decedent's death.  Do any of you have experience with a similar matter or know of relevant case law?

Many thanks,
Sara Longley


Sara D. Longley
Senior Attorney
Ivy Law Group, PLLC
1734 NW Market Street
Seattle, WA 98107
Phone: (206) 706-2909
sara at ivylawgroup.com<mailto:sara at ivylawgroup.com>
Pronouns: she, her, hers

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NOTE: Ivy Law Group offices will be closed November 11, 14, and 22-25.

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