Basic IRA Beneficiary Disclaimer Question

Submitted by Ray Kaufman on Sat, 2017-10-21 14:52

My IRA has primary beneficiary of spouse and secondary beneficiaries of equally distributed to my descendants per stirpes.

Can my spouse disclaim partially or totally at my death to our children?
If my spouse disclaims, would our children have the choice also to disclaim partially or totally to grandchildren?
Or does disclaiming in general require a trust to be setup?

Thanks
Ray



Submitted by Ben Meyer on Sun, 2017-10-22 03:50

Theoretically, disclaimers can be used as you suggest, with specific details dependent on state law.  But many IRA custodians may not be willing or able to accept them.  Since the disclaimer document will require legal interpretation, an IRA custodian may not have appropriate personnel to make a decision.  Even if a custodian gives an affirmative answer at the present time, the answer may be different when the need arises several years from now.  Would you want to take that risk?  On the other hand, with a trust, the IRA custodian only needs to accept the trust documents under IRC regulations and the IRA plan document.  The determination of trust beneficiaries, and consideration of disclaimers, will then be up to the trustees of the trust, which will relieve the IRA custodian of that burden..

Submitted by William Tuttle on Sun, 2017-10-22 19:54

  • A beneficiary may disclaim (give up rights to), but may not direct assets to beneficiaries. So in your example, with both primary and secondary beneficiaries disclaiming, the assets would go to the estate. If the grandchildren were the only benefifiaries of the estate, they would receive the assets, but if the dedcedent had not reachhed their RBD, the assets would have to be distributed in 5 years.
  • Some custodians do allow the naming of tertiary beneficiaries either directly on a form, online or through a custom beneficiary declaration. This would allow what you appear to be desiring. In this case the beneficiaries would be able to use their life expectencies if desired.
  • As pointed out by Benn, once you get into complex beneficiary options, a trust gives you better options.

Submitted by Ben Meyer on Sun, 2017-10-22 21:06

Spiritrider, if both primary and secondary beneficiaries disclaim, but with a ‘per stirpes’ designation specified for the secondary beneficiary, wouldn’t the children of the secondary inherit?  The effect of the disclaimer by the secondary would be that he or she predeceased the IRA owner as a legal matter.  Since the secondary beneficiary didn’t create the beneficiary designations, why wouldn’t he or she be able to disclaim and have the ‘per stirpes’ designation take effect?  (This doesn’t seem like a tertiary beneficiary when the ‘per stirpes’ designation is included as part of the secondary.)

Submitted by William Tuttle on Sun, 2017-10-22 22:26

Disregard my first bullet point. I missed the per stripes at the end of the OP’s first sentence. Assuming the IRA custodian allows a per stripes designation, your analysis would appear to be correct. However, I would suggest that the OP consult with a local attorney to ensure that is in fact true under their speciific state laws. I think you are always better the clearer the legal path. This why I agreed that ultimately the best option if the IRA is of sufficient size is to take this decision out of the hands of the custodian and into a trust.

Submitted by Ben Meyer on Mon, 2017-10-23 15:18

One thing further:  Phrasing the secondary beneficiary designation as “equally distributed to my descendants per stirpes” is ambiguous.  Better wording would be “equally distributed to my children per stirpes”.  Or simply name each of the children with the same percentage to each, and with the Per Stirpes designation.  “Equally to my decendants” implies a Per Capita distribution, which conflicts with the desired Per Stirpes designation.

Submitted by Ray Kaufman on Mon, 2017-10-23 23:03

I didn’t have the wording on secondary beneficiary right. This is Vanguard’s standard wording from a dropdown choice. To my descendants who survive me, per stirpes Ray

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