Life and Death Planning for Retirement Benefits

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Chapter 4: Inherited Benefits: Advising Executors and Beneficiaries 203
A. Exception for certain fiduciary actions. Thi A) discusses whether a person who
is both a beneficiary and a fiduciary of the inherited property can disclaim an interest as
beneficiary despite having taken actions with respect to the property in his capacity as
fiduciary. For disclaimers by a fiduciary in his capacity as fiduciary see B) (last
paragraph), B), (C), and B).
Actions taken by a person who is both a beneficiary and a fiduciary “in the exercise of
fiduciary powers to preserve or maintain the disclaimed property” do not constitute acceptance as
beneficiary. Reg.
Shirley Example: Shirley dies. Her will leaves her house to her three children A, B, and C, and
names C as executor. To fulfill his duties as executor under applicable state law, C arranges for
insurance, security, and maintenance for the house. These actions taken as executor would not
preclude his disclaiming his interest as beneficiary.
This exception can lead practitioners astray. This is a very limited exception for which the
IRS provides no examples in the regulations. The only fiduciary powers blessed are “to preserve
or maintain the disclaimed property.” Any exercise of discretionary powers to direct the enjoyment
of the property, even if exercised in a fiduciary capacity, would preclude a qualified disclaimer of
the property by the individual in his personal capacity, unless the exercise of discretion is limited
by an ascertainable standard. B).
B. Titling of account not determinative. The fact that a retirement plan account is retitled in
the name of the beneficiary after the death of the participant does not in and of itself mean
the beneficiary has accepted the account. See Reg. Example (6); PLR
8817061 (a surviving spouse’s filing an election to take a statutory share of the decedent’s
estate did not constitute acceptance of the statutory share; the spouse could disclaim part
of the statutory share); and PLR 9214022 B)).
Rachel Example: Rachel dies, leaving her IRA (at Brokerage Firm X) to her husband Isaac. Isaac
informs Brokerage Firm X of Rachel’s death. Firm X retitles the account “Rachel, deceased, IRA,
for the benefit of Isaac, beneficiary.” Firm X sends Isaac paperwork explaining the account
agreement, its fees, and his rights regarding rollover and investments. If this is all that happens,
Isaac has not accepted the IRA. But: If Isaac gives Firm X any instructions regarding the account,
such as buying or selling investments, he has accepted the account (or at least those investments;
see above). If he takes a withdrawal from the account, see If he names a successor
beneficiary for his interest, see “C.”
C. Naming a successor beneficiary. A beneficiary’s designating a successor beneficiary for
his interest in the account is probably not “acceptance,” unless the beneficiary dies while
that designation is in effect (i.e., before he disclaims), in which case see A). This
conclusion is reached by analogy from the way the regulations deal with a disclaimer by
the holder of a power of appointment: “The exercise of a power of appointment to any
extent by the donee of the power is an acceptance of its benefits,” says Reg.
but this apparently does not include an executory exercise: See Reg.
Example (7), in which B has a testamentary power of appointment under A’s trust,
and signs a will which would exercise the power, but then makes a qualified disclaimer of
the power before he dies (so the “exercise” is never activated).