IRA Disclaiming

Submitted by ShipsnGiggles on Wed, 2018-05-02 19:12

Interesting fact pattern that I have not come across – all help is appreciated

T-IRA owner dies leaving the account to her suriving spouse
Husband makes a qualifed disclaimer
3 sons inherit (they were contingents) due to dad disclaiming
one of three sons died (unsure when – before/after mom passing). Son has no family besides his dad and siblings.
Unsure if the beneficiary forms were per stirpes or per capita

Question:
Who inherits the deceased sons share?
I would assume if the beneficiary language is per capita – his two siblings aborb his share. However I am uncertain what to do if the assets pass per capita

Thank you



Submitted by Bruce Steiner on Wed, 2018-05-02 20:45

  • If the son predeceased the IRA owner, then the IRA would go to the contingent beneficiaries.  Most IRA owners would probably provide that if a child predeceased then his share would go to his issue, so 1/3 would go to each surviving child and 1/3 to the issue of the predeceased child.  But you have to check to see what this particular IRA owner’s beneficiary designation says.
  • If the son survived the IRA owner and then died, then his share would go to whomever he named as beneficiaries (if he had the right to name beneficiaries).  If he didn’t name beneficiaries, or if he didn’t have the right to name beneficiaries, his share would be an asset of his estate.
  • If the son survived the IRA owner and then died, his executors could disclaim his share of the IRA on his behalf.  (Depending on state law, that might require court approval.)  In that case, his share of the IRA would go as if he predeceased the IRA owner.  See the first paragraph above for more details.  The advantage of this is that, if his share goes to his children, they’ll be able to use their own life expectancies and thus get a longer stretch.
  • Bruce Steiner

Submitted by Ben Meyer on Thu, 2018-05-03 00:25

There seems to be a possible corner case here.  If the son survived the IRA owner and then died, and if he didn’t designate any beneficiaries, the IRA would probably go to his estate.  Since the deceased son has no family besides his dad and siblings, the intestacy law of his state probably designates the father as his heir under intestacy.  If the father disclaims the IRA of his wife after the death of his son, is the disclaimer valid?  Under section 2518 the disclaimant can’t receive any benefit as when he becomes the heir of his son and becomes entitled to the same IRA funds under intestacy.  So it looks like he needs to disclaim the IRA of his son as well.  Likewise, if the father disclaims the IRA of his wife before the death of his son, is he then obligated to disclaim the son’s IRA later, after the son passes?  If the father doesn’t disclaim the son’s IRA, does that invalidate the disclaimer of his wife’s IRA to the extent that the same funds will come back to him from his son’s estate? 

Submitted by Bruce Steiner on Thu, 2018-05-03 02:29

  • No, for two reasons.  First, the rule that a disclaimant can’t receive a benefit from the disclaimed property as a result of his/her disclaimer doesn’t apply to a spouse.  That’s why a spouse can disclaim in favor of a credit shelter trust.  Second, it wouldn’t go back to the spouse as a result of his disclaimer.
  • Of course, if the spouse disclaimed once, he would probably disclaim a second time.
  • Bruce Steiner

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