Sole Beneficiary of Father's IRA wishes to divide the IRA among siblings without incurring a taxable event, Beneficiary dividing up IRA among siblings Options

[ssmith]

A daughter was named sole beneficiary on one of her father's IRA's and she wishes to divide the IRA equally among her 6 siblings and herself. She wants to do this without incurring a tax liability to herself in the process. Does anyone know how this can be accomplished? I am not very familiar with IRA situations such as this one and am not having any luck with my research.

Thanks so much!
Sandy

[Sieve]

It's possible, but it will depend on the IRA document's default beneficiary provisions.

If she properly and timely disclaims 6/7 of the IRA, then she will be a designated beneficiary to only 1/7 of the IRA for purposes of post-death minimum required distributions. If the 6 siblings are the default beneficiaries under the IRA document, then all 7 will be beneficiaries to 1/7 of the IRA.

This post has been edited by Sieve: Oct 31 2008, 11:31 AM

[Bird]

I think you might be overthinking this. She's one of the 7 siblings, so (if the siblings are the default beneficiary) she should disclaim all of it and get her 1/7 under the default. Otherwise she gets 1/7th plus 1/7th of 6/7ths.

[Sieve]

Well, she did do all the leg work . . .

You're right--if the siblings can take as default beneficiaries under the document--and that's an important "if", of course--then she should disclaim all.

[Appleby]

I don’t think you can disclaim benefits, and have the benefits go to you. I think Sieve was right the first time. She would disclaim 6/7, and then ‘step aside’ so the remaining 6 children would share the disclaimed amount.

If the agreement does not have a beneficiary provision that defaults to the children, the other option would be to work out some arrangement where she takes a distribution, gives them their share and they reimburse her for any taxes incurred as a result of the amount she gives to them.

[J Simmons]

I agree with Sieve Post #2 and Appleby. There are estate distribution cases that hold if you waive, you then don't share at all in the subsequent residual or intestate distribution.

[masteff]

the other option would be to work out some arrangement where she takes a distribution, gives them their share and they reimburse her for any taxes incurred as a result of the amount she gives to them.

Actually, instead of giving the siblings money and hoping they give part of it back... have a CPA figure out the tax burden on the distribution and then split the net. (Basically, figure the daughter's taxes w/ and w/out the distribution, subtract the difference from the distribution and then divy it up.)

[Appleby]

the other option would be to work out some arrangement where she takes a distribution, gives them their share and they reimburse her for any taxes incurred as a result of the amount she gives to them.

Actually, instead of giving the siblings money and hoping they give part of it back... have a CPA figure out the tax burden on the distribution and then split the net. (Basically, figure the daughter's taxes w/ and w/out the distribution, subtract the difference from the distribution and then divy it up.)

Agreed....much better option

[Bird]

I agree with Sieve Post #2 and Appleby. There are estate distribution cases that hold if you waive, you then don't share at all in the subsequent residual or intestate distribution.

Ok, I stand corrected. Thanks.

[Sieve]

And my correction stands corrected. (I always thought that estate planning stuff was complicated . . . !!)