Disclaiming an inherited IRA

[bzorc]

A taxpayer will be inheriting a portion of an IRA (there are multiple family members named as beneificiaries) from a deceased parent. The taxpayer would like to disclaim the IRA so that it would go to the taxpayers's children and be used in the future for educational purposes.

Not being that familiar with the disclaimer process, is this feasible? In reading about the disclaiming of an IRA, it appears that upon disclaiming, the IRA passes to the contingent beneficiary of the IRA. If the taxpayer's children were not contingent beneficiaries of the IRA, I don't think this could be done. In addition, it also appears that the contingent beneficary would also be required to take MRD's from the inherited IRA based on their life expectancy.

Am I in the ballpark on this? Any thoughts would be appreciated, thanks.

[Bird]

I think you are correct; the disclaiming person has to in effect say "no thanks" and let it go wherever it would have gone had that person not been entitled to it. Then, that person is ignored completely for all purposes.

[masteff]

In reading about the disclaiming of an IRA, it appears that upon disclaiming, the IRA passes to the contingent beneficiary of the IRA. If the taxpayer's children were not contingent beneficiaries of the IRA, I don't think this could be done.

Were the children primary benes? I'd think the disclaimed portion would first divide among remaining primaries as if the disclaiming person had predeceased the IRA owner. But you really need to address this to the IRA company because their policies and procedures will control how they interpret a disclaimer.

The important point is the disclaiming person can't name who the disclaimed share goes to. It's dictated by the IRA agreement and the deceased's beneficiary designation.