An important estate planning option for inherited individual retirement accounts (IRAs) is the ability to disclaim all or a portion of the IRA. If a beneficiary disclaims an IRA within nine months of the decedent's death, the disclaimed IRA is not considered a gift when it is received by the contingent beneficiary. However, the nine-month deadline often comes after the deadline for taking the required minimum distribution (RMD). Since the primary beneficiary is not supposed to receive any benefit from the IRA before disclaiming it, there was a question as to whether the IRA had to be disclaimed before the date for the RMD.
The Internal Revenue Service (IRS) issued a revenue ruling in 2005 clarifying this situation. It allows the primary beneficiary to take the RMD before the December 31 deadline and still disclaim the balance of the IRA within the nine-month deadline. The primary beneficiary cannot direct who will receive the disclaimed IRA, since that is controlled by the decedent's designation or the terms of the IRA agreement itself.