Decline inherited traditional IRA and give to someone else

Submitted by helen roland on Tue, 2020-09-01 16:45

75 year old single inherited $600,000 Traditional IRA from sister.
I would be paying 47% (fed and state) taxes and on my ordinary income. Taking out in 10 year stretch would also be a big tax bill.
Can I decline?
Can I decline to son?
Can I decline to 4 separate grandchildren?
Can I decline and give to sister’s significant other who lived with her for 20 years?
Please advise.



Submitted by Alan - IRA critic on Tue, 2020-09-01 18:18

  • If you are not more than 10 years younger than sister, you are an “eligible designated beneficiary” and can take annual RMDs over your remaining life expectancy of 13.4 years. The 10 year rule would not apply. Also, you must already be in the top marginal bracket for distributions to be taxed at that rate.
  • You could flle a “qualified disclaimer” within 9 months from her death, but cannot re direct the account. The account would pass to the contingent beneficiary if sister named one. If she did not name a contingent beneficiary, the account would pass according to the default beneficiary on the IRA agreement, which in most cases would be sister’s estate, and the inherited IRA would pass to the beneficiaries of her will (perhaps the SO or perhaps you?). If you were also the beneficiary under her will or she had no will and you were the beneficiary under the state intestate rules, the disclaimer would not be qualified. Therefore, you have no control who would receive the account.
  • That leaves taking the distributions, paying the taxes, and gifting the proceeds to whoever you wish subject to the gift tax rules. 
  • If you do not file a disclaimer or have the IRA retitled with you as beneficiary, lack of activity in the account could result in the account being escheated to the state with income taxes deducted by the custodian at the required rate. 

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