Life and Death Planning for Retirement Benefits

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206 Life and Death Planning for Retirement Benefits
beneficiary prior to the participant’s death could raise this problem if the beneficiary then
attempted to disclaim the benefits. However, irrevocable beneficiary designations are rare
(nonexistent?) with qualified plans and IRAs.
A more realistic concern is whether the Federal law that gives married persons certain
rights in each other’s retirement benefits causes the surviving spouse to have acquired rights in
the participant’s benefits more than nine months before the date of death; see
4.4.07 To whom is the disclaimer delivered?
requires that the disclaimer be “received by the transferor of the interest, his
legal representative, or the holder of the legal title to the property to which the interest relates.”
Reg adds one more candidate, “the person in possession of such property,” but
provides no further elucidation and no examples.
In the case of retirement benefits, the disclaimer cannot be delivered to “the transferor”
(the participant) because he is dead, so that leaves “his legal representative” (i.e., the executor or
administrator of the participant’s estate), “the holder of the legal title to the property,” and “the
person in possession.” The legal title to retirement benefits is generally held by the trustee (of a
QRP or individual retirement trust) or custodian (of an individual retirement account or 403(b)
mutual fund account), who also has “possession” of the retirement plan’s assets.
The “or” in the Code and Regulation makes it appear that would be satisfied
if the disclaimer is delivered either to the executor of the participant’s estate or to the trustee or
custodian of the retirement plan, i.e., that you have a choice regarding where to send the disclaimer.
However, see Reg. and both of which speak of delivery to
“the person” described in Reg. as though in the case of any particular asset
there is only one correct recipient of the disclaimer.
Regardless of which destination would satisfy it is normally also necessary
to comply with applicable state law, which may have different requirements about where the
disclaimer must be delivered. When in doubt, send to “all of the above.”
For what it’s worth, in PLR 9016026 a qualified disclaimer of QRP benefits was filed with
the employer and the plan trustee; in PLR 9226058, a qualified disclaimer of an IRA was filed
with the Probate Court. Other letter rulings discussing qualified disclaimers of retirement benefits
don’t say where the disclaimers were filed.
4.4.08 Who gets the disclaimed benefits and how do they get them?
When a beneficiary disclaims inherited benefits, the benefits will generally pass to the
person or entity who would have been entitled to the benefits if the disclaimant had predeceased
the participant. To whom those benefits pass as a result of the disclaimer, and how they pass to
such person, are very important questions. If the benefits do not pass to the right type of person
(see “A” below) in the right way (see “B”), the disclaimer is not qualified. Even aside from the tax
consequences, the disclaimant also normally cares about who gets the benefits as a result of the
disclaimer; see “C.”
A. Property must pass to “someone other than” disclaimant requires that the
property must pass, as a result of the disclaimer, either to the transferor’s (i.e., the
participant’s) surviving spouse or to someone other than the disclaimant. Passing the