Disclaim IRA
My Mom is 96 and has a $180k IRA that is to be split – per stirpes – upon her passing per her trust document. My late brother and I are primary beneficiaries.
My brother’s share will go to his kids (as his wife has also passed). One of his kids has passed so that part is passed down another generation.
We personally will be in “IRMA hell” starting in the next few years to due (overly?) aggressive deferral of income in both qualified and non-qualified defined contribution plans.
I would prefer that her IRA pass on to my kids as we simply do not need it. Were I to accept her IRA, I would most likely turn around and give it away using QCDs. Otherwise, it is possible that the cost of accepting the inherited IRA would be outweighed by the costs (taxes, IRMAA charges, etc).
I suspect that Mom would be upset if I ask her to change her trust and effectively cut me (and my wife) out. Plus, it would incur legal fees.
So, I was wondering…
My wife is primary beneficiary on my IRA with our kids as secondary. If I were to disclaim my Mom’s IRA, I am thinking that it would revert to my wife. I am primary beneficiary on her IRA with our kids as secondary. So, if she, in turn, disclaims the IRA, would it not then go to the kids as our secondary beneficiaries?
Thank you in advance.
John
Permalink Submitted by Alan - IRA critic on Sun, 2021-02-28 17:16
Spouses are disregarded in a “per stirpes” designation, therefore your wife would not inherit any portion of Mom’s IRA, so there would be no need for her to disclaim. If you disclaimed your interest in Mom’s IRA as a trust beneficiary, your share would go to your children.
It is also important to make sure this trust is qualified for look through treatment. If it is not, then Mom’s IRA would have to be distributed over her remaining single LE, which is only 3.8 years at this time. If the trust were qualified for look through, the 10 year rule will apply, unless one of the beneficiaries is disabled and then the scenario is complicated by the Secure Act. I assume your Mom owns her IRA and is not maintaining it as a beneficiary.
The terms of the trust must be observed by the trustee of the trust. Legal advice might be needed in your state to file a disclaimer as a trust beneficiary rather than as a designated IRA beneficiary. Once any disclaimer is filed (9 month deadline from DOD), an additional determination is whether the trust documents allows for assigment of the IRA out of the trust. Such assigment does not alter the RMD distribution period.
If you do not disclaim and end up with an inherited IRA, you can name as your wife as successor beneficiary and this also does not affect the RMD distribution period. You could name her despite the fact your wife otherwise would not have inherited in the per stirpes lineal beneficiary determination. Whether your wife disclaims your own IRA upon your death is an entirely separate determination, not related at all to your Mom’s IRA.