Thank you, @Opus 17 . Below are responses.
1. I believe that a spouse can't legally pick IRA beneficiaries for more than 50% of the account, unless the other spouse signs a waiver. (The spouse can't be accidentally or deliberately disinherited without their agreement.) Did the surviving spouse sign such a waiver? Or are we just discussing the other 50% which was left to the two daughters?
I don't think all states require a spousal notarized waiver. The exact language of the designated beneficiary was "To my descendants who survive me, per stirpes." which was one of the pre-written in options from the IRA Custodian. So it goes to the sisters, not the mom. The sisters' parents should have gotten more clarification on what this beneficiary designation meant.
2. If the goal of the daughters is to return the funds to their mother's spouse, why are they trying to disclaim the inheritance knowing the accounts will go to the grandchildren?
The Custodian IRA agreement said it would go to the surviving spouse. They disclaimed their interest, knowing it would either go to their mom or children. But you're right, with the "per stirpes", it goes to the grandchildren.
3. Assuming the disclaimer was untimely, then I suggest the daughters keep the inherited IRAs in their name and hold the money "in trust" informally for the other spouse. There are several reasons why it may be advantageous for an elderly parent to not have too much ready funds. If the daughters are trustworthy, they can keep the accounts, withdraw a little for their parent (or stepparent) as needed, and take out a little extra to cover their own tax burden. And as @tagteam points out, if the disclaimer was untimely, the daughters have tax consequences anyway, so they might as well keep the accounts in their own names.
The family may also want to discuss the other parent's financial situation with an attorney who specializes in estate planning.
Thanks for this suggestion.
So if the disclaimer is non-qualified and the Inherited IRAs go to the next beneficiaries (their children) due to the "per stirpes" designation, is it still a taxable event to the sisters?
4. If you believe the custodian is wrong and the disclaimer was timely, you will need to pay an expert to prove to the custodian. I suggest an enrolled agent, which is an accountant specially trained and accepted to practice before the IRS.
Thanks for this. Yes, if a non-qualified disclaimer is a taxable event to the sisters, this is probably a path they will pursue as forms / statement of disclaimer were turned in within the nine-month window. They have emails. Sisters asked in writing if further documentation was needed in order to process. It wasn't processed, even though IRA Custodian acknowledges it was received.
Obviously with the pandemic and sadly, so many more deaths than usual, I'm sure IRA Custodians are stretched, but from what I can tell, this just seemed sloppy for them not to process or respond.
