Can an Executor and/or Trustee Ever Use a Disclaimer Power When Managing an Estate or Trust

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Estate Probate Administration and Trust Attorney

The title of this blog post is complex. So is the subject of “disclaiming”. Because an Executor and/or Trustee serve in a position of overseeing the finances of an estate or a trust, should he or she seek to disclaim property a unique conflict of interest issue is presented.  The trustee as a fiduciary is overseeing the funds of the decedent within a trust and needs to distribute the trust income and corpus according to the wishes of the decedent.  The trustee has a legal duty to the beneficiaries to act in their best interests so when the duty of the executor or trustee’s the estate conflict with the economic rights of a beneficiary, a lawsuit is possible. Fortunately, our laws provide a guide in the case of a trustee or estate fiduciary who seeks to disclaim property given to him or her.

N.J.S.A. §3B:9-4 states that a fiduciary must look to the last will or the trust document to see if the document addresses the conflict of interest directly and gives the fiduciary the power to disclaim.  If the power exists, any disclaimer by the fiduciary is valid without judicial approval if done according to the terms of the will or trust.  If the will or trust is silent on the issue, the fiduciary may still disclaim, but is required to obtain court approval to do so.  Before giving an approval the court must make a finding that the disclaimer is advisable and does not prejudice the rights of the beneficiaries under the trust or estate.  So for example, if the fiduciary is an estate executor, he or she must ensure that the creditors, devisees, heirs and beneficiaries of the estate are not prejudiced.  If the fiduciary is a trustee, he or she must not prejudice the beneficiaries of the trust.  If one of the beneficiaries is a minor child or incapacitated person, the person’s guardian or power of attorney, must also agree to the disclaimer and not prejudice the minor child or incapacitated person’s interest.  Once that is shown, the conflict of interest issue is cured, and the court then gives the approval needed for the fiduciary to disclaim the resource.

To discuss your NJ Estate Probate and Trust matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.