Disclaimers and Federalism

The beneficiary of an inheritance has the right to disclaim (i.e., decline) it, within limits ordinarily set by state law. This Article examines situations where a beneficiary’s right to disclaim might instead be governed by federal law, as a matter of both existing doctrine and public policy. Issues of federalism arise with regard to disclaimers in several contexts: (1) when a disclaimer would function to defeat a federal tax lien; (2) when a disclaimer could affect a beneficiary’s eligibility for Medicaid assistance; (3) when a beneficiary disclaims ERISA pension benefits; and (4) when a beneficiary executes a disclaimer prior to declaring bankruptcy or in the midst of a federal bankruptcy proceeding. The Article begins by developing a theoretical model of the potential costs and benefits of federal preemption, jumping off from prior scholarly discussions of this problem. The Article then addresses, from the perspective of the model, each of the four situations where a disclaimer raises federal concerns. The Article concludes that different policy considerations arise in each situation, depending upon how a disclaimer relates to federal affairs — viz., whether a disclaimer would threaten the financial interests of the federal government, whether those financial interests can be safely delegated to states, whether federal law regulates the kind of property disclaimed, and whether the disclaimer occurs in anticipation of, or within, a specialized federal proceedings. Hence, the four situations addressed in this Article call for no synchronized response from the perspective of federalism but instead demand distinct treatment