Suppose that your spouse has an IRA and you are the named beneficiary, but you don’t really need any of the money in the IRA? It’s built up tax free over a number of years, and you don’t want to incur the tax consequences, or you’d simply prefer to pass it on to your children or to someone else. Can you do that without incurring tax consequences or running afoul of the laws governing individual retirement accounts?
According to experts, the answer depends—on whether you have already taken the money. Under the New Jersey Probate Code, the beneficiary to property or an estate can “disclaim” an inheritance provided he or she has not actually taken possession of the inheritance. With an IRA, that would mean that you have not actually withdrawn any funds from the account.
So, how do you disclaim an inheritance? First, you must put it in writing. You should identify the asset for which you have been named the beneficiary, specifically state that you disclaim any right, title or interest to it, and sign the document in the presence of a notary public. The disclaimer must be filed with the surrogate within nine months of the death of the owner of the property.
There is a catch, though. When you disclaim an inheritance, the law treats it as if you had predeceased the owner. Accordingly, you don’t get to determine who now has right and title to the property. That will be determined by who had a successor interest in the will or estate planning of the original property owner.