Legal Question in Wills and Trusts in California
Cetificate of Denial for IRA distribution & tax reduction
In Feb, my father-in-law died. He had three IRAs totaling $450K, a savings account with $65K and checking acct with $7000. No other property to speak of. Unfortunately his attorney did a horrible job of helping him plan his estate ,develop his will and trust (nothing in the trust?!?!) The will indicates that the three doughters are to split the estate equally. (His entire estate is less than $650K, so we don't have to worry about estate taxes.
On the IRAs my father-in-law named the yopungest of his three daughters as the beneficiary, since she ws to be the executer of the will. This puts an unbelievable tax burden on her if she takes the money. Additionally, she and her husband could only give $20K per year to the other two sisters.
What we are planning to do is to have the youngest daughter fillout a "certificate of denial" (we think it's called) refusing to accept the money. Our understanding is that the money would then go to the estate, through probate, and then could be distributed to the three daughters.
Does this plan seem viable? Are there issues about which we need to be aware? Are there better ways to handle this?
4 Answers from Attorneys
Re: Cetificate of Denial for IRA distribution & tax reduction
Your situation raises some very difficult tax and estate issues. I do have some reactions, but would prefer not to post all of them publicly. If I understand your message correctly, the youngest sister is willing to forego getting all of the IRA funds and share it with the rest of you. This is called a disclaimer. There are strict time limits for disclaimers, and they must be done with utmost care. You should get an attorney and accountant involved to make sure everything is done right. Please let me know if you would like help. If you are somewhere other than Northern California, please let me know and I will see if I can find a lawyer in your area.
Re: Cetificate of Denial for IRA distribution & tax reduction
What you are talking about is a Qualified Disclaimer which must be done within 9 months of the death and without the person disclaiming accepting any of the benefits. It's not too complicated but should be done with the advice of an attorney. The one who disclaims is out and it depends on the wording of the will and beneficiary designation as to takes in her place. Also, if the remaining beneficiaries give her share back to her, then there is a gift. Sounds complicated, but it can be worked out. It takes a knowledgeable person to work around the rules to avoid unintended consequences.
Re: Cetificate of Denial for IRA distribution & tax reduction
Your sister may "disclaim" her interest in the IRA's, in favor of your father's legatees under his Will and Trust. To be legally effective, the disclaimer should be delievered to the Executor/Trustee within nine (9) monhts after the date of death. Since the IRA was not transferred to the Trust prior to your father's death, you will need to probate the asset, along with your father's other accounts. We would be pleased to assist you in the probate matter. Please visit us at our website at www.labusinesslawyer.com.
Re: Cetificate of Denial for IRA distribution & tax reduction
Your sister may "disclaim" her interest in the IRA's, in favor of your father's legatees under his Will and Trust. To be legally effective, the disclaimer should be delivered to the Executor/Trustee within nine (9) months after the date of death. Since the IRA was not transferred to the Trust prior to the your father's death, you will need to probate the asset, along with your father's other accounts. We would be pleased to assist you in the probate matter. Please visit us at our website at www.labusinesslawyer.com.
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