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johnl

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  1. Thanks to everyone for the replies. I am a little confused by some of the responses. I was under the impression that the only one that could keep these accounts as IRAs would be the daughter as the only named beneficiary. I did not think it was possible for the IRA accounts to remain as IRAs for anyone else. If the IRAs are disclaimed I didnt think it was possible to split them up into 5 new IRA accounts. My understanding was that if she disclaims and then the IRA goes to the estate, the IRA would basically be liquidated and cease to exist as an IRA account. The cash could then be divided amongst the siblings as per the tenets of the will. With the Roth, there would be no tax consequences. If she disclaimed the traditional IRA, wouldn't the ESTATE be required to remit all of the taxes owed at the time of liquidation? I don't see how it would be the sister's taxable income since she is not the one directly inheriting it anymore. I would think the estate would be required to pay the tax due, or would each of the siblings have taxable income equal to 1/5 of the entire taxable amount due in the year in which this happened?
  2. Hi Tax Counsel, The father was a lifelong resident of Louisiana. I will have to ask the daughter if she has the specific details on the IRA. I believe it was with Merrill Lynch....in fact I think it was the ML rep that suggested this to her in the first place. There are 2 IRAs...one is a traditional and one is a Roth. I believe there is about the same amount in both of them. So maybe it would be a good idea to follow through with disclaiming the Roth but not the traditional.
  3. Asking this to help out a friend whose father recently passed. Brief background info--- Father died unmarried a few months ago. He had 5 children - all adults of age. The first 4 by his first wife, the last by the second wife after the first wife passed away. He was divorced from the second wife years ago. Father left a will, he granted the oldest daughter ownership of his truck, with everything else (bank accounts, Merrill Lynch investments, personal effects) split equally 5 ways amongst his children. Eldest daughter name the executrix. Father also had a regular IRA and a Roth IRA- eldest daughter was named the primary beneficiary on both with NO secondary beneficiary listed. Oldest daughter would prefer to disclaim her primary beneficiary status on the IRAs and have them become part of the estate to be distributed 5 ways to the siblings as if they were part of the estate. This is for a variety of reasons: to make the distribution of assets more 'fair' to the other siblings and keep the peace amongst the family; to avoid increasing her tax bracket due to the distributions, etc. Also the youngest son, who is from the second wife, has hired his own attorney that is probing into things and complicating matters. The divorce between the father and his mother was quite acrimonious. The executrix would like to just distribute all of the assets at once and avoid having to deal with any issues he/his mother/his lawyer may bring up down the line. From the research I have done to help out, it appears this is possible. One site I found states: "Generally, a beneficiary disclaiming an inherited IRA is pretty straightforward – spelled out in Internal Revenue Code §2518, as long as the primary beneficiary executes a written instrument to disclaim all or a portion of the inherited IRA within 9 months of the death of the original account owner, the contingent beneficiary(s) will inherit the remaining account." A couple of her concerns that I hope you can help with with: Since there are no 'contingent beneficiaries' named on the IRAs, I would assume his estate would become the beneficiary. His first wife died decades ago, and he was legally divorced from the second wife at least 10 years ago. Obviously, the other siblings would agree to this arrangement since technically the eldest daughter could just keep the IRAs for herself. Due to her generosity they would all benefit from her disclaiming. If the eldest daughter disclaimed her primary beneficiary status, would that affect her ability to get her 1/5 of the IRA funds after the accounts are liquidated and made part of the estate? How will the eldest daughter know the appropriate language to use in the written instrument? It seems like this is not a standard document, and her lawyer does not seem to know anything about this process. The eldest daughter had thought about gifting 1/5 of the annual distribution to each of the siblings every year, but that may necessitate filing Gift Tax informational forms every year. Also, what happens if one of the siblings passes away? Is it split into fourths or should the deceased sibling's family get the share? It just could become quite complicated and lead to family problems down the road. The eldest daughter also thought about just liquidating the IRAs now and gifting 1/5 to each of the siblings. However, this would also create gift tax issues due to the value of the IRAs. It would have to be done over several years, or she would have to gift in excess of the annual exclusion and thus have to file gift tax returns. The disclaiming seems like the easiest and cleanest way of distributing the funds amongst the siblings. Hope someone out there could provide some guidance on this issue! Thanks!
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