Dad intended 50/50 but left full ROTH to one, full TRAD IRA to other w tax inequality. Can we change to 50/50 per account?

Submitted by David Blackburn on Tue, 2019-11-12 16:38

Dad was 78 and passed leaving a sizable $5M IRA account estate between his 2 adult kids.
Intending to split the assets 50/50, he left the full $2.5M ROTH IRA to one child, the $2.5M Traditional IRA to the other.
Net of taxes, the bene receiving the ROTH will obviously receive more than the bene receiving the Traditional IRA.
Inherited Traditional IRA MRDs are immediately effective and taxable for the Traditional IRA beneficiary.
Traditional IRA bene is in a higher ordinary income tax bracket, essentially reducing the inherited TRAD IRA value even more.
Siblings are on good terms with each other (agreeing and amicable for resolution)
Tax-free gifting of the difference between the siblings can’t be resolved within lifetime due to total value of the difference.
Can the beneficiary listed on each IRA account be updated/changed to resolve the inequality?
Can both siblings disclaim a portion for the other sibling to receive 1/2 of each of the Roth & Traditional IRA?
Do they contest the Will and stated benes, and request a division/simple 50-50 split of each account?
What is a reasonable legal/court fee and time-frame resolution with an uncontested & amicable change effort?



Submitted by Bruce Steiner on Tue, 2019-11-12 16:50

  • It may be hard to show that he intended something other than what he did.
  • You can’t have consideration for a disclaimer.  But the one who received the Roth which is more valuable could disclaim a portion of the Roth he/she received, or a portion of the other assets he/she received.
  • If you disclaim, you can’t say where the disclaimed property goes.  So make sure to check the beneficiary designation or the Will to see where the disclaimed portion of the Roth or of the other assets would go.
  • The cost shouldn’t be significant in the context of $5 million of IRAs, and perhaps other assets.
  • Bruce Steiner

Submitted by David Mertz on Tue, 2019-11-12 17:32

Bruce, with regard to your second bullet I think you are you saying that one disclaiming a portion in exchange for the other disclaiming a portion constitutes consideration and would disqualify the disclaimers, but there is no problem if only one disclaims.  In the general case, would it be impossible to establish that each disclaimer was not in exchange for the other when each beneficiary benefits from the other’s disclaimer?

Submitted by Bruce Steiner on Tue, 2019-11-12 20:45

  • Yes, if they both disclaim it could be treated as consideration.  In that case, the disclaimers wouldn’t be good.
  • Only the one who gets the Roth has to disclaim to even them up (assuming that the disclaimed portion would go to the other one).

Submitted by David Blackburn on Tue, 2019-11-12 21:17

Can they contest the will, and request 50-50 reassignment of both accounts to each of the benes?

Add new comment

Log in or register to post comments