Distributing disclaimed TIRA
My mother was to be the receipant of my father’s TIRA. My father was 84 but had not taken out his RMD for this year. My mother has chosen to disclaim the TIRA which leaves the account to her three sons, ages 61,57, and 49. I know the RMD has to be taken out this year which will go to his estate. But the money left over ( appox. 60,000) will be divided between the 3 sons. Can each son open their own account withdrawing it from the existing brokerage account? Tanks for any help.
Permalink Submitted by Anonymous (not verified) on Thu, 2010-07-29 20:39
Very simple: YES.
Disclaiming the IRA just meant that the account has now 3 non-spouse beneficiaries. After the RMD is taken out for the year of death (2010?), the sons should make sure they each get the account transfered into their names as an Inherited IRA (preferably by the end of 2010). Then they are free take any amount or liquidate the whole 20K. If they don’t need the money, mandatory RMDs start in 2011 based on each son’s life expectancy – based on timely separation by 12/31/2011.
I am not sure I agree with the comment of the Final RMD for 2010 going to the estate. At the point of death/disclaiming the acount belongs to the sons. So someone or all 3 can satisfy the RMD. Whether they turn around to use the money for estate costs is up to them.
pko
Permalink Submitted by Alan Spross on Thu, 2010-07-29 21:57
pko outlined one method of handling this situation.
However, there is another way to proceed if more time is desired to complete the disclaimer, but subject to the 9 month deadline. Per IRS RR 2005-36 (see link), the RMD can be taken by the beneficiary without eliminating her option to disclaim. This RMD would be taxable to the beneficiary who receives the funds. For example, if your father passed in late May, your mother would have until late Feb, 2011 to complete the disclaimer per Sec 2518. But the RR allows her to first take his 2010 RMD prior to year end and then to complete the disclaimer early next year. So this is a timing issue that can avoid having to request a waiver of the 50% penalty, even though the IRS is almost certain to approve the waiver.
But this can also be done as pko indicated, subject to the primary deadline of 9 months for the disclaimer. In that case, the disclaimer is done first, then the contingent beneficiaries satisfy the RMD, which is again taxable to the beneficiary that receives it in full or in part. In no event is the RMD reported on the estate income tax return of your father.
http://easysite.commonwealth.com/EasySites/EasySite_T9193Y/_uploads/How%…
Permalink Submitted by Bruce Steiner on Sun, 2010-08-01 02:22
It shouldn’t take very long to disclaim if desired.