How to Disclaim an Inherited IRA
Beneficiaries have different reasons for certain actions when it comes to inheriting money. When a beneficiary disclaims money bequeathed via an IRA, the reason is most likely related to taxes. If a beneficiary disclaims the IRA assets, it is as if they were never given to her, so there is no responsibility for taxes. The next named beneficiary then inherits the assets.
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Instructions
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Contact the IRA custodian via phone and ask what the requirements are for disclaiming an inherited IRA. The Internal Revenue Service requires a written notice of refusal, but the custodian may have a special form and require a death certificate to prove you are entitled to make such a request. Request any forms required.
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Write the refusal. This may be done with the form obtained from the IRA custodian or simply with a letter stating an "irrevocable refusal" of the inheritance.
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Submit the refusal no later than nine months after the IRA owner's death. Minor beneficiaries have until they are 21 to submit the refusal.
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Take none of the IRA assets prior to the refusal or after, even through a third party. Some states have clauses that require those disclaiming the assets to further disclose whether they are part of bankruptcy proceedings, since disclaiming might be a ploy to avert paying off debts.
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Tips & Warnings
Disclaiming assets is irrevocable. Consult a tax adviser about the best scenario for you and your family.
If the IRA had a required minimum distribution because the deceased was already 70½ at the time of death, this needs to be done by Dec. 31 of the year of death. The disclaiming beneficiary may take this distribution prior to disclaiming the IRA and will not be penalized.
