Disclaiming a Roth IRA
I’m reading Ed Slott’s book “Your Complete Retirement Planning Road Map” regarding ways to disclaim an IRA so as to pass it on to my children to extend the years and add more value to the inheritance of a Roth IRA. My mother has her IRA account with Fidelity and there are four designated primary beneficiaries with no designations for contingent beneficiaries. The primary designations do have “per stripes” included. According to the “Ask Ed” example on page 182 (paperback version), option 2 seems to suggest that this language would allow the primary beneficiary to disclaim the assets and they would fall to the “per stripes”; however, Fidelity’s IRA advisory specialists are telling me that the only time “per stripes” would take effect is if I as a primary beneficiary would pass in advance of the original account owner. If I were to disclaim, that language would not pass the assets to my children; rather, my disclaimer would give a greater portion to each of the remaining primary beneficiaries. Are they interpreting that or handling that correctly? If so then the book example is not correct. If Fidelity is incorrect, do you know who to contact at Fidelity to get them to revisit how the disclaiming process should work? Thanks
Permalink Submitted by Bruce Steiner on Wed, 2016-10-19 00:06
Permalink Submitted by Larry Lightfield on Wed, 2016-10-19 01:49
This is how Fidelity defines “per stripes”. My mother has designated each of her 4 children as primary beneficence and indicated “yes” to per stripes for each one. So if I as one of those primary designated beneficiaries decides to disclaim, my goal would be to pass my portion on in equal shares to my three children to extend the value of growth for her RIRA. Not sure why Fidelity wouldn’t understand this and act accordingly.
Permalink Submitted by Larry Lightfield on Wed, 2016-10-19 01:54
I think the disconnect with Fidelity is the idea that disclaiming is as though you predecease the account owner. They on the other hand are telling me you actually have to die. One would think that a disclaiming beneficiary is not a foreign concept to Fidelity??
Permalink Submitted by Alan - IRA critic on Wed, 2016-10-19 02:30
Sounds like the rep you spoke to does not understand that when one of your primary beneficiaries disclaims, the effect is that this beneficiary pre deceased you and his share goes to his line of succession. In other words, the disclaimant has not died, but is treated as if he did. Fidelity reps need training on disclaimers. To be on the safe side, I would check the beneficiary clause in your Roth agreement to make sure it conforms to the link you posted.