I would appreciate any help on this issue. Here’s the situation.

John, husband, dies June 2008 at age 80.
Jane, wife, still alive and in good health. 75 yrs old.
Husband & Wife have 3 living adult children (ages 45, 50, 52)

Both individuals have individual A/B trusts set up. Both live in Pennsylvania.

Jane is named as John’s primary IRA Beneficiary with 3 Children as contingent
beneficiaries in equal amounts.

John dies and leaves $600k in IRA and $2.1M outside of IRA (held in Trust)
Jane , still alive, has $38K in IRA and $2.5M outside IRA (held in Trust)

Jane doesn’t need John’s IRA to live on and is willing to dis-inherit John’s IRA and give to 3 children.

What are the advantages of having Jane disclaim John’s IRA? If her children then inherit the IRA and stretch over their life expectancies, how does this affect Jane’s $2M exemption? Does the exemption get reduced by the amount of the IRA ($600K)?

Your advise is appreciated. Pro’s & Con’s???