I am the families financial advisor.

Background

1. Traditional IRA owner (father) died past his RBD. Date of Death was six months ago. Wife pre-deceased the IRA owner. IRA value is approx. $88,000.

2. 100% Primary Designated Beneficiary is adult daughter who is 100% disabled, a Medicaid beneficiary, and I’ve just recently learned, is terminally ill. I advised against susch a designation but the best I could get the client to agree to was to designate a contingent bene; thankfully.

3. 100% Contingent Designated Beneficiary is adult son. There are two other adult children who are not listed as IRA beneficiaries.

4. There is a large family Trust that benefits all four adult children.

5. The family is concerend about Medicaid clawback issues should the Primary Bene/Medicaid Bene receive the IRA funds.

6. I have adivsed the family, and the families Estate planing attorney to consider a disclaiming strategy. My firm’s legal department is VERY familiar with properly executing such a stratregy and I am pleased to know that my firm’s advice to me is spot on with Ed’s advice in “Retirement Savings Time Bomb…”

7. I have also advised the family to consider retaining an Elder Law attorney to advise on the Medicaid issues.

8. The Estate planing attorney raised some concerns that IF a renunciation is made by the Primary beneficiary that could raise “Gifting Issues”.

Questions

1. Are there gifting issues if a renunciation is made by the Primary bene?

2. If a renunciation is made by the primary bene does the IRS view the inheritance by the Contingent Bene as if the Primary never existed? No consequences at all for the Primary?

What else do I need to consider in this case???