Disclaimer question
Good morning,
Daughter is primary beneficiary on Mom’s traditional IRA with Dad as contingent beneficiary. Mom passes away this year in January. Custodian provided daughter with all the necessary forms (new IRA application, transfer, beneficiary designation etc.) to sign and send back in and she does. So now the inherited IRA is set up properly. Daughter now wants to disclaim. The custodian is the same large mutual fund company that Mom and Dad have and now daughter. Custodian tells her that even though the account has been set up properly as an inherited IRA that she now owns, she can still disclaim it since she hasn’t withdrawn anything.
I thought since the primary beneficiary has already established the inherited IRA and transferred the funds from the deceased’s ira to it, that she is past the point of disclaiming. Am I over thinking this?
Permalink Submitted by Alan - IRA critic on Thu, 2015-02-26 16:19
The fund company is correct. See attached IRS letter of response. Merely re titling an inherited IRA in beneficiary format does not constitute acceptance of the funds for disclaimer purposes. RR 2005-36 even took this further by ruling that the beneficiary can even complete the decedent’s year of death RMD and still disclaim. See p 5: http://www.irs.gov/pub/irs-wd/1125009.pdf
Permalink Submitted by Jose Morales on Thu, 2015-02-26 16:22
I guess they are interpreting the requirement that the disclaimant not have accepted any interest in the IRA prior to disclaiming as meaning “withdrawn funds” from the IRA and not the act of establishing an inherited IRA. The price for being wrong in this situation would probably be that the entire amount of the IRA would be considered distributed to the daughter, if the IRS were to find out and not recognize the disclaimer. I can’t think of a written determination or any guidance that I’ve read that covers this situation so I’d be cautious with assuming that the disclaimer would still be allowed. *I spoke too soon. Thank you for that link Alan!