IRS Clarifies Inherited IRA Disclaimer Rules

The article explains that beneficiaries disclaim an inherited IRA to manage estate assets, equalize distributions among heirs, or for tax planning. Internal Revenue Code §2518 generally requires a written disclaimer within nine months of the original account owner's death, provided the beneficiary has not received a benefit.

A critical clarification from Revenue Ruling 2005-36 ensures that RMDs for the year of death, if taken by the primary beneficiary, do not count as a disqualifying benefit, preserving the option to disclaim. This ruling also permits partial disclaimers, either as a specific (pecuniary) dollar amount or a percentage of the account as of the date of death, with any attributable income also disclaimed.

If a partial disclaimer occurs after an RMD, the RMD is allocated to the primary beneficiary’s non-disclaimed portion. The author, jblankenship, emphasizes the complexity and advises consulting an estate attorney for specific state laws and beneficiary designations like "per stirpes."