Disclaiming a Roth IRA

Submitted by Larry Lightfield on Tue, 2016-10-18 20:13

I’m reading Ed Slott’s book “Your Complete Retirement Planning Road Map” regarding ways to disclaim an IRA so as to pass it on to my children to extend the years and add more value to the inheritance of a Roth IRA. My mother has her IRA account with Fidelity and there are four designated primary beneficiaries with no designations for contingent beneficiaries. The primary designations do have “per stripes” included. According to the “Ask Ed” example on page 182 (paperback version), option 2 seems to suggest that this language would allow the primary beneficiary to disclaim the assets and they would fall to the “per stripes”; however, Fidelity’s IRA advisory specialists are telling me that the only time “per stripes” would take effect is if I as a primary beneficiary would pass in advance of the original account owner. If I were to disclaim, that language would not pass the assets to my children; rather, my disclaimer would give a greater portion to each of the remaining primary beneficiaries. Are they interpreting that or handling that correctly? If so then the book example is not correct. If Fidelity is incorrect, do you know who to contact at Fidelity to get them to revisit how the disclaiming process should work? Thanks



Submitted by Bruce Steiner on Wed, 2016-10-19 00:06

  • Unless the governing instrument (usually the Will but in this case the beneficiary designation) provides otherwise, a person who disclaims is treated as having predeceased. the transferor (usually the testator but in this case the IRA owner).
  • However, your description of the facts is inconsistent.  Does the beneficiary designation say “my issue per stirpes” (in which case the share of a child who predeceases or disclaims goes to that child’s issue), or does it say “my children in equal shares” with no contingent beneficiaries?  Or does it say that the share of a child who precedeases goes to his/her issue but the share of a child who disclaims goes to the surviving children?  She should make sure that her beneficiary designation says what she wants it to say.
  • The lawyer who prepares the disclaimer should be able to handle this when the time comes.


Submitted by Larry Lightfield on Wed, 2016-10-19 01:49

This is how Fidelity defines “per stripes”.  My mother has designated each of her 4 children as primary beneficence and indicated “yes” to per stripes for each one.  So if I as one of those primary designated beneficiaries decides to disclaim, my goal would be to pass my portion on in equal shares to my three children to extend the value of growth for her RIRA. Not sure why Fidelity wouldn’t understand this and act accordingly.

  • What does a per stirpes designation mean? When you select per stirpes you specify that the share designated to that individual is passed to their children, in equal portions, if the individual dies before you do. If you don’t select the per stirpes option, then the percentage that you have designated to a beneficiary who doesn’t survive you is split equally among other named primary or contingent beneficiaries, as applicable.


Submitted by Larry Lightfield on Wed, 2016-10-19 01:54

I think the disconnect with Fidelity is the idea that disclaiming is as though you predecease the account owner.  They on the other hand are telling me you actually have to die.  One would think that a disclaiming beneficiary is not a foreign concept to Fidelity??



Submitted by Alan - IRA critic on Wed, 2016-10-19 02:30

Sounds like the rep you spoke to does not understand that when one of your primary beneficiaries disclaims, the effect is that this beneficiary pre deceased you and his share goes to his line of succession. In other words, the disclaimant has not died, but is treated as if he did. Fidelity reps need training on disclaimers. To be on the safe side, I would check the beneficiary clause in your Roth agreement to make sure it conforms to the link you posted.



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