Post-death Disclaimer of Unaccepted Retirement Benefits Approved by IRS
The IRS has privately ruled that a disclaimer of retirement benefits filed by the Administratrix of the estate of a deceased woman was a qualified disclaimer since the benefits, left to the woman upon the death of her husband, were not accepted by her during her lifetime.
PLR 201125009.
Facts. Husband died, testate, survived by his Wife and their three children. Upon his death, Husband held several investments in various retirement accounts, including a traditional IRA and two 403(b) accounts at Brokerage Firm A, and an additional 403(b) account at Brokerage Firm B. The beneficiary designation forms for the retirement accounts listed Wife as the primary beneficiary of the accounts, and a testamentary trust established under Husband’s will as the contingent beneficiary. At the time of his death, Husband was receiving RMDs from his retirement accounts, which amounts were deposited directly into their personal bank account (owned jointly with rights of survivorship by Husband and Wife). Subsequent to his death, several RMDs were deposited into the same personal account.
Wife later passed away, and the court appointed Daughter to serve as Administratrix of Wife’s estate. Daughter closed the personal bank account, transferred the balance into an Estate Account, and successfully petitioned the court to allow her to disclaim Wife’s interest in the retirement accounts. Therefore, the Estate Account held the proceeds from the RMD which were distributed in the personal bank account after Husband’s death. Wife received no other distributions from the retirement accounts.
IRS Treatment of RMDs. The IRS determined that Wife was deemed to have accepted the RMDs which were directly deposited into jointly owned bank account after Husband’s death, as well as the income attributable to these RMDs. However, the IRS allowed Daughter, on behalf of Wife’s estate, to make a qualified disclaimer of the substantial balance remaining in the retirement accounts since Wife did not accept the assets during her lifetime.