Disclaiming an Inherited IRA

Disclaiming an Inherited IRA

 

A disclaimer is a legal document and formal refusal of an inheritance by a beneficiary.  Disclaimer rules apply to all IRA beneficiaries.  Beneficiaries are not required to accept an IRA (or any portion thereof) and may instead choose to disclaim all or a portion of their share.

If someone inherits an IRA but decides to disclaim it, it is important for the disclaiming beneficiary to avoid a few common errors.

To have a valid disclaimer, the beneficiary must not have accepted or benefitted from the IRA assets or property.  The only exception to this rule is the year of death RMD taken for the deceased owner.  All disclaimers must be submitted in writing to the IRA custodian within 9 months of the IRA owner’s death.

Disclaimers are irreversible, permanent decisions.  Some beneficiaries make the mistake of disclaiming an IRA, with the intent to pass on the disclaimed assets to someone else like their child or spouse.  Disclaimed IRA assets may only go to the contingent beneficiary or beneficiaries named by the original owner.  Disclaiming beneficiaries have zero control over the disclaimed amounts and how they flow.