Disclaiming an IRA

Submitted by Dean Dawson on Thu, 2019-02-28 15:52

I have a client who has been with his partner for 20 plus years (not a community property state). She has 3 children from a previous marriage and he has two daughters from a previous marriage. He would like the beneficiaries on the majority of his accounts to read as follows:

50% partner (per stirpes)
25% daughter (per stirpes)
25% daughter (per stirpes)

If his partner decides to disclaim, how would her 50% be distributed?

Her children?
The other two primary beneficiaries?

Is there any reason to believe the answer would be different for life insurance than for an IRA account?

Regards,

Dean Dawson



Submitted by Alan - IRA critic on Thu, 2019-02-28 18:21

The applicable contract beneficiary clause must be reviewed. For example, the Vanguard IRA agreement would direct the partner’s share exclusively to her surviving issue if she were to pre decease or disclaim. 

Submitted by Bruce Steiner on Thu, 2019-02-28 22:42

  • Her share would go as provided in the beneficiary designation.  In your example, if 50% goes to the partner, if she survives the IRA owner, or if not then to her issue, then if she disclaims her share would go to her issue.
  • Use equal parts rather than percentages in case one of the dispositions fails (in other words, if someone predeceases the IRA owner without leaving any issue).
  • You can do the same for life insurance as for an IRA.
  • Make sure the language of the beneficiary designation form (or rider) is clear as to who gets what under each contingency.
  • Bruce Steiner

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