Elderly parents as child’s beneficiary
Son died in July at age 51, and had named his parents, ages 87 and 83, as his equal primary beneficiaries on his Money Purchase Pension Plan. Money will be rolled out into inherited IRA’s. Dad’s RMD factor next year is 6.3 and Mom’s is 8.1…they’ll each get roughly $230,000, so RMD’s will be BIG next year..much more than they want or need. They are of very modest means, and this inheritance (as sad and tragic as it is) will make a difference in their remaining lifetime…not that they wanted it, but it is what it is.
I wondered about the possibility of the 87 year-old father disclaiming his half and the 83 year old mother accepting her half. I’m hopeful that there’s a chance that the father’s disclaimed portion can instead go to the three surviving siblings of the decedent (ages 54, 50, and 45) assuming they are named as contingent beneficiaries. If they aren’t, this is probably moot. If this is possible, then the parents will have access to plenty of capital, and the other half can be split in thirds and potentially taken out at a MUCH slower pace by the three surviving kids.
Thoughts??
Permalink Submitted by Alan - IRA critic on Thu, 2014-11-13 00:54
It needs to be determined if the siblings were named as contingent beneficiaries. If they are not, but instead are named as beneficiaries in decedent’s will, they could receive the 50% share but they would probably not be able to stretch the RMDs because the plan would likely require a lump sum distribution. Parents could at least stretch the proceed for a few years. Best decision probably rests on some combination of the parent’s need for funds, their marginal tax rates vs the marginal rates for the siblings. Parents take the RMDs and gift 14k to each sibling each year which might work unless parent’s tax rates are high in relation to siblings.