The Federal Tax Treatment of Disclaimers of Future Interests: A Call for Reform

Federal tax laws essentially preclude individuals with a future interest from disclaiming because the time in which a qualified disclaimer can be executed may pass before the person becomes aware of the interest and long before the interest becomes possessory and fixed as to quality and quantity. This article examines the state of the law prior to enactment of these limiting tax provisions, examines the call for reform by commentators, and examines the legislative history resulting in the current law. The author asserts Congress made an informed decision albeit a poor one. The author recommends Congress revisit the issue and enact legislation to permit an individual to disclaim within a reasonable period of time after the later of occur of (1) becoming aware of the future interest or (2) the future interest becoming indefeasibly fixed.