GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2007
H 1
HOUSE BILL 634*
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Short Title: Renunciation Amendments. |
(Public) |
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Sponsors: |
Representative Ross. |
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Referred to: |
Judiciary I. |
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March 14, 2007
A BILL TO BE ENTITLED
AN ACT TO AMEND THE LAW RELATING TO RENUNCIATIONS, AS RECOMMENDED BY THE GENERAL STATUTES COMMISSION.
The General Assembly of North Carolina enacts:
SECTION 1. G.S. 31B-1 reads as rewritten:
"§ 31B-1. Right to renounce succession.
(a) A person who succeeds to a property interest as:
(1) Heir, orHeir;
(2) Next of kin, orkin;
(3) Devisee, orDevisee;
(4) Legatee, orLegatee;
(4a) Donee;
(5) Beneficiary of a life
insurance policy who did not possess the incidents of ownership under the
policy at the time of death of the insured, or insured;
(6) Person succeeding to a
renounced interest, or interest;
(7) Beneficiary under a
testamentary trust or under an inter vivos trust, or trust;
(8) Appointee under a
power of appointment exercised by a testamentary instrument or a
nontestamentary instrument, or instrument;
(9) Repealed by Session Laws 1989, c. 684, s. 2.
(9a) Surviving joint tenant, surviving
tenant by the entireties, or surviving tenant of a tenancy with a right of survivorship,
or survivorship;
(9b) Person entitled to share in a
testator's estate under the provisions of G.S. 31-5.5, or G.S. 31-5.5;
(9c) Beneficiary under any other testamentary or nontestamentary instrument, including a beneficiary under:
a. Any qualified or nonqualified deferred compensation, employee benefit, retirement or death benefit, plan, fund, annuity, contract, policy, program or instrument, either funded or unfunded, which is established or maintained to provide retirement income or death benefits or results in, or is intended to result in, deferral of income;
b. An individual retirement account or individual retirement annuity; or
c. Any
annuity, payable on death, death account, or other right to death
benefits arising under contract; orcontract.
(9d) The dulyDuly authorized
or appointed guardian with the prior or subsequent approval of the clerk of
superior court, or or, if required, of the resident judge of the
superior court, of any of the above. above; or
(9e) Fiduciary, including an attorney-in-fact of any of the above, and including a personal representative of any of the above appointed under Chapter 28A of the General Statutes, subject to G.S. 31B-1.1(a), (b), and (c);
(10) The personal
representative appointed under Chapter 28A of any of the above,
or the attorney-in-fact of any of the abovemay renounce
in whole or in part the right of succession to any property or interest
therein, including a future interest, by filing a written instrument under the
provisions of this Chapter. A renunciation may be of a fractional share or any
limited interest or estate. The renunciation shall be deemed to include the
entire interest of the person renouncing unless otherwise specifically limited.
A person may renounce any interest in or power over property, including a power
of appointment, even if its creator imposed a spendthrift provision or similar
restriction on transfer or a restriction or limitation on the right to
renounce. Provided, however, Notwithstanding the foregoing,
there shall be no right of partial renunciation if the decedent or donee creator
of the power expressly so provided in the instrument creating the interest.
(b) This Chapter shall apply to all renunciations of present and future interests, whether qualified or nonqualified for federal and State inheritance, estate, and gift tax purposes, unless expressly provided otherwise in the instrument creating the interest.
(c) The instrument of
renunciation shall (i) identify the transferor of the property or
interest in the property or the creator of the power, (ii) describe the
property or interest renounced, (ii) (iii) declare the
renunciation and extent thereof, (iii) and (iv) be signed and
acknowledged by the person authorized to renounce. renouncing.
(d) A custodial parent of a minor for whom no general guardian or guardian of the estate has been appointed may renounce, in whole or in part, an interest in or power over property (including a power of appointment) that, but for the custodial parent's renunciation, would have passed to the minor as the result of another renunciation. The custodial parent may renounce the interest or power even if its creator imposed a spendthrift provision or similar restriction on transfer or a restriction or limitation on the right to renounce."
SECTION 2. G.S. 31B-1A is recodified as G.S. 31B-1.1. G.S. 31B-1.1, as recodified by this section, reads as rewritten:
"§ 31B-1.1.
Right to renounce fiduciary powers.Renunciation by fiduciary.
(a) Except as otherwise
provided in the testamentary or nontestamentary instrument, a fiduciary under a
testamentary or nontestamentary instrument may renounce, in whole or in part,
fiduciary rights, privileges, powers, and immunities by executing and by
delivering, filing, or recording a written renunciation pursuant to the
provisions of G.S. 31B-2. A immunities; however, a fiduciary
may not renounce the rights of beneficiaries unless the instrument creating the
fiduciary relationship authorizes such a renunciation. The instrument of
renunciation shall (i) identify the creator of the rights, powers, privileges,
or immunities, (ii) describe any right, power, privilege, or immunity
renounced, (iii) declare the renunciation and the extent thereof, and (iv) be
signed and acknowledged by the fiduciary authorized to renounce.
(b) The instrument of
renunciation shall (i) describe any fiduciary right, power, privilege, or
immunity renounced, (ii) declare the renunciation and the extent thereof, and
(iii) be signed and acknowledged by the fiduciary authorized to renounce.Except
to the extent a statute of this State expressly restricts or limits a
fiduciary's right to renounce, a fiduciary acting in a fiduciary capacity,
including a trustee of a charitable trust, may renounce an interest in property
as permitted by G.S. 31B-1.
(c) If a fiduciary renounces property or a power that otherwise would have become property held by the fiduciary pursuant to the instrument, the property or power shall not become property held by the fiduciary pursuant to the instrument. A renouncing trustee continues to hold legal title to the property or power if, by the terms of the trust instrument, the effect of the renunciation is to transfer equitable title to a beneficiary of the trust.
(d) If a fiduciary so elects, the fiduciary may institute a special proceeding by petition in the superior court for a determination as to whether a renunciation is or would be compatible with the fiduciary's duties as provided in this subsection:
(1) A petition filed under this subsection regarding a renunciation that includes any interest in real property may be filed in the office of the clerk of the superior court of any county in which all or any part of the real property is situated or any county in which venue would otherwise lie.
(2) Commencement, notice and service of summons shall be accomplished in accordance with Article 33 of Chapter 1 of the General Statutes.
(3) All holders of record legal title to the interest renounced or to be renounced as well as all beneficiaries under the instrument creating the fiduciary relationship in esse shall be parties to the proceeding, and where any of the beneficiaries are under legal disability, their duly appointed general guardians or their guardians ad litem shall be made parties. The clerk of the superior court shall appoint a guardian ad litem to represent the interests of any beneficiaries not in esse, and the guardian ad litem shall be a party to the proceeding. The trustee of a charitable trust filing a petition under this subsection shall provide a copy of the petition to the North Carolina Attorney General, and the petition shall contain a specific statement that it is being provided to the Attorney General pursuant to this subdivision.
(4) The petition shall state the basis for the fiduciary's allegation that the renunciation is or would be compatible with the fiduciary's duties, considering among other things the intended purposes of the trust or other instrument and the impact of the renunciation on beneficiaries and potential beneficiaries.
(5) After considering among other things the intended purposes of the trust or other instrument and the impact of the renunciation on beneficiaries and potential beneficiaries, the clerk shall enter an order stating the clerk's determination as to whether the renunciation is or would be compatible with the fiduciary's duties.
(6) The effectiveness of a renunciation is not affected by a proceeding under this subsection."
SECTION 3. G.S. 31B-2 reads as rewritten:
"§ 31B-2. Time and place of filing renunciation.
(a) To be a qualified
disclaimer for federal and State inheritance, estate, and gift tax purposes, an
instrument renouncing a present interest of renunciation shall be
filed within the time period required under the applicable federal statute for
a renunciation to be given effect as a disclaimer for federal estate and gift
tax purposes. If there is no such federal statute the instrument shall be filed
not later than nine months after the date the transfer of the renounced
interest to the renouncer person renouncing was complete for the
purpose of such taxes.
(b) An instrument
renouncing a future interest shall be filed not later than six months after the
event by which the taker of the property or interest is finally ascertained and
his interest indefeasibly vested and he is entitled to possession even though
such renunciation may not be recognized as a disclaimer for federal estate tax
purposes.When a renunciation is made within the time period required
under subsection (a) of this section, the spouse of the person renouncing real
property or an interest in real property is not required to join in the
execution of the instrument of renunciation, and, as provided in G.S. 31B-3(a)(1),
the spouse has no statutory dower, inchoate marital rights, elective share, or
any other marital interest in the real property or real property interest
renounced.
(c) The renunciation shall
be is effective when filed with the clerk of court of (i)
in the county in which court proceedings have been commenced for
the administration of the estate of the deceased owner or deceased donee
creator of the power or, if they have not been commenced, in which
they could be commenced. A copy of the renunciation shall be delivered in
person or mailed by registered or certified mail to any personal
representative, or other fiduciary of the decedent or donee of the power. If
the property interest renounced includes any proceeds of a life insurance
policy being renounced pursuant to G.S. 31B-1(a)(5) the person renouncing
shall mail, by registered or certified mail, a copy of the renunciation to the
insurance company issuing the policy. If the property or property interest
renounced is created by nontestamentary instrument, a copy of the renunciation
shall be delivered in person, or mailed by registered or certified mail, to the
trustee or other person who has legal title to, or possession of, the property
or property interest renounced.power; or (ii) if proceedings have not
been commenced, then in a county in which they could be commenced; or (iii) in
all other cases, in a county with a court that has jurisdiction to enforce the
terms of the instrument creating the interest renounced. In addition to the
above requirements, a renunciation of real property, or an interest therein,
shall be registered in accordance with the provisions of G.S. 31B-2(d).
(d) If real property or
an interest therein is renounced, a copy of the instrument of renunciation
shall also be filed for recording in the office of the register of deeds of
all counties wherein any part of the interest renounced is situated. registered
as provided in G.S. 47-18 or G.S. 47-20. The instrument of
renunciation shall be indexed in the grantor's index under (i) the name of the deceased
owner transferor or donee creator of the power, and
(ii) the name of the person renouncing. The renunciation of an interest, or
a part thereof, in real property shall not be effective to renounce such interest
until a copy of the renunciation is filed for recording in the office of the
register of deeds in the county wherein such interest or part thereof is
situated. A spouse of a person renouncing real property or an interest in real
property shall have no statutory dower, inchoate marital rights, or any other
interest in the real property or real property interest renounced. Failure
to file or register the instrument of renunciation does not affect the
effectiveness of the renunciation as between the person renouncing and persons
to whom the property interest or power passes by reason of the renunciation;
however, record title to a renounced interest in real property does not pass to
persons receiving the renounced interest by reason of the renunciation until
the instrument of renunciation is registered as provided in G.S. 47-18 or
G.S. 47-20.
(e) If an instrument transferring an interest in or right, privilege, power or immunity over property subject to a renunciation is required or permitted by law to be filed or registered, the instrument of renunciation may be so filed or registered. Failure to file or register the instrument of renunciation does not affect the effectiveness of the renunciation as between the person renouncing and persons to whom the property interest or power passes by reason of the renunciation."
SECTION 4. Chapter 31B of the General Statutes is amended by adding a new section to read:
"§ 31B-2.1. Delivery of instrument of renunciation by the person renouncing to other persons.
(a) In this section:
(1) "Beneficiary designation" means an instrument, other than an instrument creating a trust, naming the beneficiary of:
a. An annuity or insurance policy;
b. An account with a designation for payment on death;
c. A security registered in beneficiary form;
d. A pension, profit-sharing, retirement, or other employment-related benefit plan;
e. An individual retirement account or retirement annuity; or
f. Any other nonprobate transfer at death.
(2) "Deliver" means to deliver in person or to send, properly addressed, by first-class mail, telephonic facsimile transmission equipment, electronic mail, or third-party commercial carrier, or by any method permitted by G.S. 1A-1, Rule 4.
(b) The failure to deliver a copy of an instrument of renunciation by a method permitted by G.S. 1A-1, Rule 4, or by a method that results in actual receipt tolls any statute of limitations with regard to any right of action for breach of fiduciary duty.
(c) If a fiduciary renounces an interest in property held pursuant to the instrument creating the fiduciary relationship, a copy of the instrument of renunciation shall be delivered to each living person whose beneficial interest is affected by the renunciation.
(d) In the case of an interest created under the law of intestate succession or an interest created by will, other than an interest in a testamentary trust, a copy of the instrument of renunciation must:
(1) Be delivered to the personal representative of the decedent's estate; or
(2) If no personal representative is then serving, be filed with a court having jurisdiction to appoint the personal representative.
(e) In the case of an interest in a testamentary trust, a copy of the instrument of renunciation must:
(1) Be delivered to the trustee then serving;
(2) If no trustee is then serving, be delivered to the personal representative of the decedent's estate; or
(3) If no personal representative or trustee is then serving, be filed with a court having jurisdiction to enforce the trust.
(f) In the case of an interest in an inter vivos trust, a copy of the instrument of renunciation must:
(1) Be delivered to the trustee then serving;
(2) Except as provided in subdivision (3) of this subsection, if no trustee is then serving, be filed with a court having jurisdiction to enforce the trust; or
(3) If the renunciation is made before the time the instrument creating the trust becomes irrevocable, be delivered to the settlor of the trust or the transferor of the interest.
(g) In the case of an interest created by a beneficiary designation made before the time the designation becomes irrevocable, a copy of the instrument of renunciation must be delivered to the person making the beneficiary designation.
(h) In the case of an interest created by a beneficiary designation made after the time the designation becomes irrevocable, a copy of the instrument of renunciation must be delivered to the person obligated to distribute the interest.
(i) In the case of a renunciation by a surviving holder of an interest in property subject to a right of survivorship, a copy of the instrument of renunciation must be delivered to the persons to whom the person renouncing reasonably believes the renounced interest passes, at their last addresses known to the person renouncing.
(j) In the case of a renunciation by a permissible appointee, or taker in default of exercise, of a power of appointment at any time after the power was created, a copy of the instrument of renunciation must be delivered:
(1) To the holder of the power;
(2) To the fiduciary acting under the instrument that created the power or, if no fiduciary is then serving under the instrument that created the power, filed with a court having authority to appoint the fiduciary; and
(3) To any holder of legal title to the property subject to the power of appointment other than the fiduciary.
(k) In the case of a renunciation by an appointee of an exercised power of appointment, a copy of the instrument of renunciation must be delivered:
(1) To the holder of the power or the personal representative of the holder's estate;
(2) To the fiduciary under the instrument that created the power or, if no fiduciary is then serving under the instrument that created the power, filed with a court having authority to appoint the fiduciary; and
(3) To any holder of legal title to the property subject to the power of appointment other than the fiduciary.
(l) In the case of a renunciation of a power of appointment by the holder of the power, a copy of the instrument of renunciation must be delivered:
(1) To the fiduciary acting under the instrument that created the power or, if no fiduciary is then serving under the instrument that created the power, filed with a court having authority to appoint the fiduciary; and
(2) To any holder of legal title to the property subject to the power of appointment other than the fiduciary.
(m) In the case of a renunciation by a fiduciary of a right, privilege, power, or immunity relating to a trust or estate, a copy of the instrument of renunciation must be delivered as provided in subsections (c), (d), (e), or (f) of this section, as if the power renounced were an interest in property.
(n) In the case of a renunciation of a power by an agent, including an attorney-in-fact, a copy of the instrument of renunciation must be delivered to the principal or the principal's representative.
(o) In the case of a renunciation by a trustee of a charitable trust, a copy of the instrument of renunciation must be delivered to the North Carolina Attorney General in addition to any other delivery required by this section.
(p) In the case of a renunciation by a donee, a copy of the instrument of renunciation must be delivered to the persons to whom the person renouncing reasonably believes the renounced interest passes, at their last addresses known to the person renouncing.
(q) The failure to deliver a copy of the instrument of renunciation as required in this section does not affect the validity of the renunciation for purposes of G.S. 31B-3 even though the renunciation may not be recognized as a disclaimer for federal estate tax purposes."
SECTION 5. G.S. 31B-3 reads as rewritten:
"§ 31B-3. Effect of renunciation.
(a) Unless the decedent, donee of a power of appointment, or creator of an interest under an inter vivos instrument has otherwise provided in the instrument creating the interest, the property or interest renounced devolves as follows:
(1) If the renunciation is
filed within the time period described in G.S. 31B-2(a), the property or
interest renounced devolves as if the renouncer person renouncing
had predeceased the date the transfer of the renounced interest to the renouncer
person renouncing was complete for federal and State inheritance, estate,
and gift tax purposes, or, in the case of the renunciation of a fiduciary
right, power, privilege, or immunity, the property or interest subject to the
power devolves as if the fiduciary right, power, privilege, or immunity never
existed. Any such renunciation relates back for all purposes to the date the
transfer of the renounced interest to the renouncer person renouncing
was complete for the purpose of those taxes. taxes, and the spouse of
the person renouncing has no elective share or other marital interest in the
renounced property.
(2) If the renunciation is
not filed within the time period described in G.S. 31B-2(a), the property
or interest devolves as if the renouncer person renouncing had
died on the date the renunciation is filed, or, in the case of the renunciation
of a fiduciary right, power, privilege, or immunity, the property or interest
subject to the power devolves as if the fiduciary right, power, privilege, or
immunity ceased to exist as of the date the renunciation is filed.
(3) Any future interest
that takes effect in possession or enjoyment after the termination of the
estate or interest renounced takes effect as if the renouncer person
renouncing had died on the date determined under subdivision (1) or (2) of
this subsection, and upon the filing of the renunciation the persons in being
as of the time the renouncer person renouncing is deemed to have
died will immediately become entitled to possession or enjoyment of any such
future interest.
(b) In the event that the
property or interest renounced was created by testamentary disposition, the
devolution of the property or interest renounced shall be governed by
G.S. 31-42(a) notwithstanding that in fact the renouncer person
renouncing has not actually died before the testator.
(c) In the event that the
decedent dies intestate, or the ownership or succession to property or to an
interest is to be determined as though a decedent had died intestate, and the renouncer
person renouncing had predeceased the decedent, then the property or
interest renounced shall be distributed to such issue, per stirpes. If the renouncer
person renouncing does not have such issue, then the property or
interest shall be distributed as though the renouncer person
renouncing had predeceased the decedent.
(d) Except as provided in the instrument of renunciation, if a renunciation causes property to pass to a trust in which the person renouncing holds a power of appointment, the person renouncing is deemed to have renounced the power of appointment with respect to assets passing into the trust by reason of the renunciation.
(e) Unless otherwise provided in the instrument of renunciation, the interest in property being renounced by a surviving tenant by the entireties upon the death of the other tenant is the one-half interest in the entireties property to which the surviving tenant would have been entitled by right of survivorship, and, as to that one-half interest, the deceased tenant is the transferor.
(f) Unless otherwise provided in the instrument of renunciation, the interest in property being renounced by a surviving joint tenant with right of survivorship is limited to the fractional interest of the deceased joint tenant to which the surviving joint tenant would have been entitled by right of survivorship, and, as to that fractional interest, the deceased joint tenant is the transferor."
SECTION 6. G.S. 31B-4 reads as rewritten:
"§ 31B-4. Waiver and bar.
(a) The right to renounce property or an interest therein is barred by:
(1) An assignment, conveyance, encumbrance, pledge, or transfer of the property or interest, or a contract therefor by the person authorized to renounce,
(2) A written waiver of the right to renounce, or
(3) Repealed by Session Laws 1998-148, s. 4.
(4) A sale of the property or interest under judicial sale made before the renunciation is effected.
(b) The renunciation or
the written waiver of the right to renounce is binding upon the renouncer
person renouncing or person waiving and all persons claiming through or
under him. that person.
(c) A fiduciary's application for appointment or assumption of duties as fiduciary does not waive or bar the fiduciary's right to renounce a right, power, privilege, or immunity.
(d) No person shall be liable for distributing or disposing of property in reliance upon the terms of a renunciation that is invalid for the reason that the right of renunciation has been waived or barred, if the distribution or disposition is otherwise proper, and the person has no actual knowledge or record notice of the facts that constitute a waiver or bar to the right of renunciation.
(e) The right to renounce property or an interest in property pursuant to this Chapter is not barred by an acceptance of the property, interest, or benefit thereunder; provided, however, an acceptance of the property, interest, or benefit thereunder may preclude such renunciation from being a qualified renunciation for federal and State inheritance, estate, and gift tax purposes.
(f) An instrument waiving or barring the right to renounce an interest in real property is not effective as to persons protected under G.S. 47-18 or G.S. 47-20 until either (i) registered as provided in those sections or (ii) registered pursuant to a judicial sale proceeding as described in subdivision (4) of subsection (a) of this section in which the person renouncing is a party. The instrument of waiver or bar shall be indexed in the grantor's index under (i) the name of the transferor of the property or interest in the property or creator of the power, and (ii) the name of the person whose renunciation is waived or barred."
SECTION 7. Chapter 31B of the General Statutes is amended by adding a new section to read:
"§ 31B-4.1. Tax qualified renunciation.
If, as a result of a renunciation or transfer, the renounced or transferred property is treated pursuant to the provisions of Title 26 of the United States Code, as now or hereafter amended, or any successor statute thereto, and the regulations promulgated thereunder, as never having been transferred to the person renouncing, then the renunciation or transfer is an effective renunciation, notwithstanding any other provision of this Chapter. This section does not preclude an action for breach of fiduciary duty."
SECTION 8. G.S. 31B-6 is repealed.
SECTION 9. This act becomes effective January 1, 2008, and applies to instruments executed on or after that date.