Disclaiming retirement plan account to non named contingent
John dies at age 32 leaving his state retirement plan equally to his parents both age 56. Both parents want to disclaim 100% to a niece age 4. Their are no contingent beneficiaries listed on the retirement plan. My question is can an IRA or retirement plan be disclaimed down to a non listed beneficiary? If so, then the niece being age 4 would require a custodian (probably her mother). Is it possible to set up an inherited IRA for the niece with the mother as a custodian? Thank you.
Permalink Submitted by Alan - IRA critic on Tue, 2017-01-24 18:25
A disclaimant cannot re direct the disclaimed benefits to anyone they wish. If parents disclaimed the death benefits, the estate of the deceased would most likely be the default beneficiary under the plan. If the niece were the will beneficiary of the deceased, they would inherit the plan, however since the actual beneficiary would be the estate and decedent passed before the RBD, the 5 year rule would apply that would eliminate the stretch the niece would have if the niece would have been the designated beneficiary on the plan. In addition, the funds could not be transferred to an inherited IRA when the estate becomes the beneficiary of a qualfied plan. The best option for the parents is to set up their own inherited IRAs to receive a direct rollover from the plan, and use their RMDs to make annual gifts to the niece (perhaps to UTMA) up to 14k from each parent. Parents will have a 29 year applicable distribution period.
Permalink Submitted by Daryl Phillips on Tue, 2017-01-24 19:15
Thank you!