IRA beneficiary deceased prior to distribution of benefits - can estate disclaim

Parent passed away and adult child passed away shortly thereafter.  We are still within the 9 month disclaimer period from parent's date of death.  The estate of the child wishes to disclaim IRA so it can pass other beneficiaries.  Custodian says this can't be done.    Are they correct or can the estate disclaim because we are still in the disclaimer period?   If possible to disclaim,  any citation or other guidance  to give the custodian would be appreciated.       

Before considering any person’s or estate’s disclaimer, first discern which person or estate is the IRA’s default beneficiary (if no named primary or contingent beneficiary survives); it might be the IRA holder’s, not the child’s, estate. Read carefully the IRA’s governing documents.

If one is considering a disclaimer, read carefully the IRA’s governing documents to discern whether the IRA allows a disclaimer, and what conditions a disclaimer must meet for the IRA trustee or custodian to accept and follow a disclaimer.

If an IRA permits a beneficiary to disclaim a plan benefit, whether that power can be exercised only by the beneficiary personally or by the beneficiary’s executor, personal representative, guardian, or attorney-in-fact as a fiduciary might depend on the IRA’s text, including whether meeting Internal Revenue Code § 2518 conditions is a condition for the IRA trustee’s or custodian’s acceptance of a disclaimer, whether the IRA sets further conditions, and which State’s law governs the IRA.

Unless an IRA states that a power to disclaim can be exercised by an executor, personal representative, guardian, or attorney-in-fact, it might be that only the beneficiary personally may exercise the power to disclaim. See, by analogy, R. Scott Nickel, as Plan Benefit Adm’r of the Thrift Plan of Phillips Petroleum Co. v. Estate of Lurline Estes, 122 F.3d 294, 21 Empl. Benefits Cas. (BL) 1762, Pension Plan Guide (CCH) ¶ 23937U (5th Cir. Sept. 22, 1997).

If the IRA permits a disclaimer and does not preclude a fiduciary’s disclaimer, consider State law. Don’t assume the applicable State law is the law of the relevant decedent’s domicile. An IRA’s choice-of-law provision might govern more than you imagine. And States’ laws vary.

Even if a fiduciary has power under applicable State law to make a disclaimer, such a disclaimer might not be a qualified disclaimer for Federal tax purposes. Compare, for example, IRS Letter Rulings 2000-13-041 (Jan. 4, 2000), 96-15-043 (Jan. 17, 1996), 96-09-052 (Dec. 7, 1995) (disclaimer recognized) with, for example, IRS Letter Ruling 94-37-042 (June 22, 1994) (disclaimer not recognized); see also Rev. Rul. 90-110, 1990-2 C.B. 209 (Dec. 24, 1990) (disclaimer by trustee not a qualified disclaimer).

This information is not advice to anyone.

As always, lawyer-up.

BenefitsLink neighbors, do you have any practical experiences with what an IRA custodian allows or refuses?

thank you for your insightful response.   

As usual, Gulia makes sense.  If you're talking about real money, then you need real legal advice.  Otherwise, just go with the custodian, the easy route.