Dislaiming assets after 9 months
A client, who is the beneficiary of their deceased husband’s IRA, wants to disclaim their right to the decedent’s IRA assets. They cannot do this in the standard “disclaimer” becasue the window of opportunity has passed (it has been two years since the original IRA owner’s death). What options does the beneficiary have now? What happens if they simply don’t accpet the money?
Can the beneficiary pay the penalites for 2 years missed RMDs and then somehow pass the assets to the decedent’s estate or child without having to receive a taxable distribution of the assets? Even if the assets come out of the IRA, is there anyway for the surviving spouse to [i][b]not[/b][/i] accept the funds and make the distribution taxable to the estate?
Permalink Submitted by Alan Spross on Fri, 2011-04-29 17:22
I am not aware of any way to do this. Certainly, not accepting the funds could eventually result in the IRA escheating to the state. Not taking RMDs would result in the 50% excess accumulation penalty.
This sounds like she wants the money to go to childen who are probably in a much lower tax bracket. If so, she is probably stuck with taking distributions and gifting the net tax adjusted amount to the children each year. If over 13k a gift tax return is required but she would probably not have to actually pay gift taxes. If the amount is very large, she may want to consider gifting prior to 2013 when the 5mm unified gift/estate exclusion might be reduced considerably for gifts.
A QCD for 2011 could also be used to cover the 2011 RMD and avoid taxes, but then the children do not get the QCD amount.
I am assuming that this is all about tax rate differential, but there might be much more to this issue. Age of the client could be an issue, and the tax brackets of the children may not always be lower than hers. Of course, if the amount is large then estate taxes could be an issue and if it is small, then the 13k annual exclusion would eliminate the need to file a gift tax return if she decides to gift.