Hi all,
I wanted to provide an update in case it helps anyone else. The sisters did consult with their parents' estate attorney.
As a matter of principle, the sisters are still going to dispute with the IRA Custodian because the IRA Custodian didn't process the original disclaimer request in a timely manner, which would have ensured it was considered 'qualified'.
However, even as a non-qualified disclaimer, the IRA Custodian confirmed they do not generate tax forms in doing a disclaimer, so the sisters (as disclaimants) are *not* taxed on the assets that are transferred to their kids. The IRA Custodian transfers the assets from the grandfather directly to the grandchildren (not the sisters). The kids will file tax forms for the distributions when they take distributions. As per the 10 year rule of non-spousal inherited IRAs, the kids have 10 years to withdrawal all funds from these accounts.
It's important to note the sisters never took control of their father's IRA accounts, which would have been a different story and likely would have resulted in a tax consequence to them if they had.
From a filing perspective, the sisters will need to account for this 'gift over' as part of their annual gift tax allowance, or all at once as part of their lifetime gift tax exemption. In this case, the estate is well under any estate tax or generation-skipping tax (GST) limits, so that doesn't come into play.
I hope this summary helps someone else in a similar situation in the future.
The question to ask the IRA Custodian in understanding any tax consequence of a non-qualified disclaimer is:
- will there be any tax forms generated as part of this disclaimer? (answer should be no). If so, which ones?
