When disclaimed by the primary beneficiary, the IRA will pass to the next legally named beneficiary, which in this case is the child. In either case, the child, as sole beneficiary, can now stretch out the IRA distributions over his or her lifetime. There's also more flexibility for multiple beneficiaries. If more than one beneficiary inherits an IRA, distributions are based on the life of the oldest beneficiary. Now this strategy can be put into place as late as December 31 of the year following the year of the owner's death.
Problems also can occur when one beneficiary is a charity and the other is a named individual.
In this situation, the named individual cannot use his or her own life expectancy. Under the new rules, however, distributing the charity's share from the IRA before the end of the year following the year of death allows the named individual to stretch out the remaining assets over his or her lifetime. Again, if there are multiple named individuals, they may choose to break it into multiple IRAs as suggested above. To make the most of the IRA Fresh Start rules, contact your First Union Securities Finanacial Advisor today. 2001 First Union Securities.