Estate as beneficairy
The IRA owner died leaving one of two brothers the sole beneficiary of his IRA. The brother that inherited the IRA wants to spilt it with his brother. There were no contingent beneficairies listed and the IRA plan document does not have default beneficiaries. If the current beneficiary does a renunciation of the IRA and the estate becomes the beneficiary is there a way to split the IRA evenly between the two brothers and take RMDs based on their individual ages?
Thank you,
Permalink Submitted by Alan Spross on Tue, 2010-10-26 23:41
The named beneficiary can file a qualified disclaimer, but should be very cautious before doing so. The beneficiary cannot direct where the dollars go, and in addition the brother cannot disclaim to himself. Therefore, if the decedent’s will named both brothers as beneficiary, the disclaimer would fail since half the disclaimed amount would go to the disclaimant. This would only work if the will named only the brother who was not named directly on the IRA. Another problem is that the portion going through the estate would be subject to the 5 year rule if the decedent passed prior to the required beginning date.
If the amount is modest, it might be easier to make annual gifts of 13,000 or less with the amount adjusted for income taxes.
Note: It is unlikely that the IRA does not have a default beneficiary. Most agreements default to the estate.
Permalink Submitted by Bruce Steiner on Wed, 2010-10-27 02:27
Check the IRA agreement carefully. If there are two beneficiaries and one disclaims, it’s possible the share of the one who disclaims will go to his estate, but it’s also possible that the share of the one who disclaims will go to the other one.