Can beneficiary of IRA disclaim after assets received?
Situation
Dad’s will divides estate among 4 sons. Dad listed only one son (who is the estate’s executor) as beneficiary of his IRA with no contingent beneficiaries. Dad dies.
Objective: Divide Dad’s IRA equally among the 4 brothers as BDA-IRA’s.
To further complicate matters, the beneficiary has converted the assets to a BDA-IRA in his name on 1/29/09. If the objective can be achieved, can this election be reversed?
Permalink Submitted by Alan Spross on Fri, 2009-04-10 00:36
Chuck,
Transferring not just the full amount, but even 25% to a BDA IRA contemplates acceptance of interest in the IRA, therefore a qualified disclaimer is eliminated. Per IRS RR 2005-36 he could have distributed any of Dad’s RMDs for his year of death or prior years without disqualifying a subsequent disclaimer, but that’s the sole exception allowed. Another potential problem is that the son is a 25% will beneficiary, and he cannot disclaim when he acquires an interest under the disclaimer.
If the estate was not the IRA default beneficiary, the disclaimer would not have worked anyway.
He could now make annual tax free gifts up to the annual gift tax exclusion to each sibling, and since he will have to report the full income from the IRA distributions, the gifted amount should be the post tax amount. This does not work out as well if this son is in the highest bracket of the siblings.