My mother-in-law died last year from a long illness, with an IRA benefiting her estate, the residuary of which is to be placed in trust for her two grandchildren. She had originally named only her first grandchild as the IRA beneficiary, but after the second was born, she changed the beneficiary to the estate and set up the trust in the will, in case more grandchildren came along.

This now forces distributions over a 5-yr period instead of lifetime. In addition, the funds are subject to much higher taxes and can be used to pay creditors. We are wondering if it is possible for the estate to disclaim the IRA benefits, allowing it to pass to next-of-kin. That would be her grandchildren’s mother, who can then disclaim it in favor of the intended beneficiaries. It’s obvious she wanted her grandkids to benefit, but she didn’t understand the consequences of naming her estate as beneficiary.

If the estate cannot disclaim the IRA benefits, can the executor direct the IRA be rolled over to IRAs benefiting the grandchildren, without the funds being used to pay creditors?