## Facts

- Louise S. Monroe died in 1989 with a multimillion-dollar estate; her husband, J. Edgar Monroe, was executor and residuary beneficiary.
- The will made numerous specific cash bequests and several bond trust bequests, with each bequest bearing a proportionate share of death taxes; the residue passed to Edgar.
- Accountants advised that estate and GST taxes would substantially reduce several legacies, while property passing to Edgar would qualify for the marital deduction.
- Edgar and a relative met with 29 individual legatees, explained that disclaiming would shift property to Edgar and reduce transfer taxes, and referenced Edgar’s past generosity.
- All 29 legatees executed written disclaimers of their bequests; there were no express promises or threats, and no legally enforceable agreement for repayment.
- After the disclaimers, Edgar made inter vivos gifts to the disclaimants in amounts equaling or exceeding the disclaimed bequests; Edgar died in 1990.
- The IRS treated the disclaimers as nonqualified and assessed estate/transfer tax consequences; the Tax Court agreed as to 28 disclaimers, finding they were induced by an implied promise.

## Issues

1. Whether the legatees’ written renunciations satisfied the requirements of a “qualified disclaimer” under IRC § 2518 and the Treasury Regulations despite expectations of later compensation and subsequent gifts from the surviving spouse.
2. Whether an “induced or coerced” disclaimer theory based on an implied promise can disqualify a disclaimer absent an express or enforceable agreement.
3. Whether post-disclaimer gifts from the residuary beneficiary constitute “acceptance” of the disclaimed interest or its benefits, or otherwise amount to impermissible direction over where the disclaimed property passes.

## Decision

- The Fifth Circuit largely reversed the Tax Court.
- The court held the Tax Court’s implied-promise “coerced/induced” approach was inconsistent with IRC § 2518 and its regulations.
- For 28 of the 29 disclaimers, the court concluded the statutory and regulatory requirements for qualified disclaimers were met.
- The court treated one disclaimer differently on case-specific facts, leaving a narrow exception to the general reversal.

## Legal Principles

- Qualified-disclaimer status under IRC § 2518 is determined by the statute’s objective requirements (including timely written refusal, no prior acceptance of the interest or its benefits, and passage of the interest without the disclaimant’s direction), not by subjective motives or moral pressure.
- Absent an express or legally enforceable arrangement, later voluntary gifts from the residuary beneficiary are separate transfers and do not, by themselves, constitute acceptance of the disclaimed interest or its benefits.
- A disclaimer does not violate the “no direction” requirement when the governing instrument fixes where disclaimed property passes (e.g., into a residue for a residuary beneficiary), and the disclaimant lacks power to redirect the property.
- IRC § 2518 permits post-mortem tax planning through disclaimers so long as the statutory and regulatory conditions are satisfied.

## Conclusion

The Fifth Circuit held that most of the legatees’ renunciations were qualified disclaimers under IRC § 2518 because the analysis turns on formal statutory criteria, and later gifts by the surviving spouse—without an enforceable quid pro quo—did not convert the disclaimers into taxable acceptances or directed transfers.


Estate of Monroe v. Commissioner, 124 F.3d 699 (5th Cir. 1997)