Life and Death Planning for Retirement Benefits

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212 Life and Death Planning for Retirement Benefits
The deadline for this type of disclaimer is nine months after the death of the participant
(not nine months after the subsequent death of the primary beneficiary).
Here are issues to consider with respect to such disclaimers:
A. Who is the successor beneficiary? When a beneficiary dies after becoming entitled to the
benefits, the person who succeeds to the deceased beneficiary’s interest is called the
successor beneficiary. If the successor beneficiary is not the deceased
beneficiary’s own estate there are two potential obstacles to a disclaimer by the
beneficiary’s executor:
First, if the beneficiary himself had designated a successor beneficiary A)), then
a qualified disclaimer by the beneficiary’s executor is probably not possible. The beneficiary’s
death would cause his “executory” designation of a successor beneficiary C)) to be
considered “executed,” and this would be deemed acceptance by the beneficiary, precluding
disclaimer. Estate of Engelman, 121 T.C. 54 (2003).
Second, if there is a successor beneficiary (other than the participant’s own estate) who has
been designated by the participant D)), one case held that the successor beneficiary is
automatically entitled to ownership of the benefits upon the death of the original beneficiary, so
the estate of the original beneficiary had no standing to disclaim. Nickel v. Estate of Estes, 122 F.
3d 294 (5th Cir. 1997). Though this case has been criticized (and might not be followed by other
courts), if there is a designated successor beneficiary, that successor beneficiary is likely to claim
the benefits, citing this case.
B. If the fiduciary is also a beneficiary. When the beneficiary’s executor disclaims benefits
that are payable (as a result of the beneficiary’s death) to the now-deceased beneficiary’s
estate, the interest he is disclaiming is the deceased beneficiary’s interest in those benefits.
Thus, the executor of the now-deceased original beneficiary can make such a disclaimer
on behalf of the deceased beneficiary even if the executor in his individual capacity (1) is
a beneficiary of the original beneficiary’s estate and (2) will receive the benefits personally
as a result of the estate’s disclaimer.
Such a disclaimer appears to violate the rule that the disclaimed assets must pass to
someone other than the disclaimant A)), since the asset is beneficially owned by the same
individual both before and as a result of the disclaimer. However, it does not violate that rule,
because when he disclaims in his capacity as executor of someone’s estate he is not deemed to be
disclaiming on behalf of himself individually as beneficiary of that estate.
See Dancy, 872 F. 2d 84 (4th Cir. 1989), in which a son, as executor of his mother’s estate
(of which he was also the sole beneficiary), was allowed, on her behalf, to make a qualified
disclaimer of her interest as surviving joint owner of certain property she held with her husband.
This disclaimer was allowed even though the son was also the beneficiary of the husband’s estate
which would receive the property as a result of the disclaimer; and PLRs 9015017 and 8749041
(involving similar situations).
4.4.13 Building disclaimers into the estate plan: Checklist
It is wise, at the planning stage, to anticipate the possibility of disclaimers. For example,
the participant may be trying to choose between naming his spouse as beneficiary, to achieve