Tax Consequences of Disclaimed IRA
Surviving spouse disclaims her husband’s IRA. The contingent beneficiaries are the three children. Are three new IRAs created or do the children just receive the proceeds and pay income tax?
Surviving spouse disclaims her husband’s IRA. The contingent beneficiaries are the three children. Are three new IRAs created or do the children just receive the proceeds and pay income tax?
Permalink Submitted by Alan Spross on Mon, 2008-03-17 00:45
The effect of a proper disclaimer is that the disclaimant is treated as having pre deceased the IRA owner. The childrent would be treated as designated beneficiaries, and they should create separate accounts prior to 12/31 of the year following parent’s death. That enables each to use their own remaining life expectancy for RMDs.
Each beneficiary can then make their own decision on whether to stretch their share or accelerate distributions. They should be aware there are no rollovers allowed and any change of custodian must be done by direct trustee transfer. They should also name their own successor beneficiaries.