Disclaimer and IRA
Husband, 89, died with a $670,000 state qualified retirement plan in November, 2009. Wife was primary beneficiary but disclaimed her interest within 9 months of date of death. 4 children were the contingent beneficiary. We have just discovered that the state continued to pay out monthly payments after death (we believe it was based on RMD tables) for three more months – December 2009, Janaury 2010 and February 2010. the payments went to a Joint account owned by decedent and spouse. Our concern is that the distributions in 2010, year after death, to the joint account with spouse(that disclaimed) could disqualify the disclaimer. Which could get real sticky in that the plan has already been distributed to children.
Thanks!
David
Permalink Submitted by Alan Spross on Mon, 2010-11-08 23:51
This is a question that should be fielded by Bruce Steiner, an attorney that specializes in this area.
The solution may rest on whether there are any adverse parties who would profit if the disclaimer were disqualified. As for the IRS, it might require a letter ruling, but there is probably plenty of precedent for automatic payments that were not immediately terminated vrs the disclaimant taking new non RMD related distributions. Complicating the issue is the 2009 RMD waiver, which some custodian’s systems were unable to address, whether the distributions were in fact equal to the monthly RMD, whether the amount changed eff January, 2010, etc. Age of the surviving spouse is also in their favor, may not have even thought about or known about the joint account.
Remember, the IRS has ruled that taking the decedent’s RMD would not disqualify an otherwise qualified disclaimer and that is why the above factors may be material. If the decedent was at all behind in his RMD obligations for years prior to 2009, that should be an automatic solution and the first thing to check into.
I am sure that Bruce has probably dealt with this situation directly (NY, NJ, FL). It probably happens rather frequently.
Permalink Submitted by Bruce Steiner on Tue, 2010-11-09 03:52
Alan: thanks for the kind words.
Revenue Ruling 2005-36 (involving IRA benefits) is helpful on this, as is PLR 200303024 (involving a joint account).