spouse beneficiary disclaiming IRA
My client’s wife just passed away with an IRA account. Her husband is the primary beneficiary and their two daughters are 50/50 contingents.
My client has more than sufficient assets of his own and is interested in disclaiming his wife’s IRA and having it pass to the two daughters.
The deceased was under 70 1/2 and was not taking distributions. My client is under 70 1/2 and is still working.
I know the daughters will have to begin RMD’s based on their life expectancy and the husban would not. However, based on my clients assets and life insurance proceeds he will be collecting, this is his preference.
Can this be done? Are there any special details I sould make him aware of if he discalimes?
Thank you.
Reed Ameden
Permalink Submitted by Alan Spross on Tue, 2007-08-28 21:23
Sure, it can be done, but must be done completely in accord with Sec 2518. The disclaimer must be completed within 9 months. There are other issues to be considered if any of the daughters are minors.
You are correct about the daughters having to take RMDs beginning no later than 12/31 next year. They should also create separate account before that so that each can use their own life expectancy for the RMDs. The IRA agreement should be verified with respect to any type of election required to avoid the 5 year rule, and they should name their own successor beneficiaries as soon as the disclaimer is processed.
With respect to the client, once the disclaimer is processed, the IRA is out of his estate and control, so hopefully the daughters do not have any issues with respect to using the stretch wisely. Remember to check if there is any tax basis (Form 8606) that would transfer to the daughters if the wife ever made any non deductible contributions.