This short article will shed light on the titling of an inherited IRA and the maneuvering of retirement assets through the disclaimer process. First and foremost, it is always recommended that you work with a competent, educated, and experienced advisor to keep your retirement funds safe and secure.
In the first sample case, John’s sister passes away leaving John her IRA. Realizing the importance of titling, John seeks out advice from several advisors and gets conflicting responses. What is the Answer?
The titling of an inherited IRA can vary from one IRA custodian to another. The deceased IRA owner’s name must remain on the inherited IRA account title and the account title must indicate that it is an inherited IRA by using the word “beneficiary” or “beneficiary IRA” or “inherited IRA.”
There is no set format as long as the deceased IRA owner’s name remains on the account and it is clear that this is an inherited IRA. Some examples of properly titled inherited IRAs are: “John Smith IRA (deceased 01/01/2015) F/B/O John Smith, Jr., Beneficiary” or “John Smith, Jr. as beneficiary of John Smith.”
Here again in the second example, John is the executor of his father’s estate. John’s father, who was 75, left him as the sole beneficiary on his retirement account. John has a younger sister who is listed as the sole contingent beneficiary. John’s father also had a spouse whom was not related to John and his sister. Their father wrote an unofficial Will and discussed with John the fact that he wanted to leave 40% of his cash assets to his spouse, 30% to John, and 30% to John’s sister. Can John disclaim part of the IRA monies, transfer his share to an inherited IRA account, and designate the other percentages to the contingent and spouse beneficiaries? John’s father had taken his RMD prior to his death.
You can choose to do a partial disclaimer of whatever amount of the IRA you choose. However, you cannot then designate the percentages that go to the sister. The full amount of the disclaimed assets will go to the sister.