Can Secondary Ben’y Wife Assume A Partially Disclaimed IRA?
An IRA owner has named his son as the primary IRA beneficiary and his wife as the secondary beneficiary. On the owner’s death, if the son partially disclaims the IRA, can the wife assume the disclaimed portion into her own IRA or must she inherit it since she is not the only IRA beneficiary?
Permalink Submitted by Jose Morales on Wed, 2008-10-15 20:26
a non-spouse beneficiary cannot assume IRA funds from a deceased IRA owner regardless of how he/she has come about being the designated beneficiary.
When the father passes away the IRA does not belong to the son. The son is merely the beneficiary of the IRA. Whether the son disclaims or passes away, the wife is not considered a spouse beneficiary. She is a contingent or secondary beneficiary.
Permalink Submitted by Alan Spross on Wed, 2008-10-15 20:42
If the son properly disclaims, the share that is inherited by the spouse can be rolled over to the spouse’s own IRA account.
Another possibility here is that the son could create a separate inherited IRA account for himself by direct transfer after the disclaimer, leaving only the surviving spouse as beneficiary on the original account. The surviving spouse could then take penalty free distributions from that account if not yet 59.5 because an inherited IRA is not subject to early withdrawal penalties.
Permalink Submitted by Jose Morales on Wed, 2008-10-15 20:56
When we are speaking of “the wife” are we speaking of the son’s wife or the father’s wife? That makes a world of difference.
Permalink Submitted by fairira on Wed, 2008-10-15 21:21
To urusei2 and alan-oniras: Thank you for your responses to my question. I apologize that I failed to make it clear that I was speaking of the IRA owner’s wife (and not the son’s wife) and that she is older than 70-1/2.
Since it is the IRA owner’s wife who is the secondary beneficiary, presumably you both agree that this wife could assume the IRA even though she is not the only beneficiary of this IRA. My question arose because of my impression that where there are several primary IRA beneficiaries including the IRA owner’s wife, she cannot assume but must inherit her share of the IRA. Is this impression correct?
Thank you again.
Permalink Submitted by Al Fry on Thu, 2008-10-16 17:59
The wife, as surviving spouse can roll the disclaimed share to herself, as long as separate accounts are established. Even though they normally have until 12.31 of the year following death to establish seperate accounts, iin this case it should be done by 9.30 in the year following death. so that the surviving spouse is clearly “the sole beneficiary” of her separate share.
Permalink Submitted by charles lore on Fri, 2008-10-17 01:43
To be clear.. to the extent son has disclaimed he is treated as if he is dead ie does not exist. The contingent ( I use word contingent, you use secondary) in effect becomes primary. Since this is wife of owner and thus a spouse, she can roll her interest into her own ira and treat it as if it was hers all along.