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401(k) without a beneficiary


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#1 Rob O.

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Posted 20 October 2008 - 08:29 AM

My mother in law passed away last December but hadn't designates a beneficiary in the 401k she inherited from her husband. She did have a will that split everything evenly between my wife and her sister. They were both named as co-executors. Upon receiving the proper paperwork, the plan admin moved her 401k into an account in the name of the estate. The estate could close as early as November 19th according the to attorney with entire estate being less than 200k.

I realize that they have up to 5 years to withdraw the money but how can they do that if the money is in the estate's name and it's set to close in the next month or so? Can they request that the plan splits the money into accts in my wife and her sister's names?

#2 Appleby

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Posted 20 October 2008 - 03:25 PM

My mother in law passed away last December but hadn't designates a beneficiary in the 401k she inherited from her husband. She did have a will that split everything evenly between my wife and her sister. They were both named as co-executors. Upon receiving the proper paperwork, the plan admin moved her 401k into an account in the name of the estate. The estate could close as early as November 19th according the to attorney with entire estate being less than 200k.

I realize that they have up to 5 years to withdraw the money but how can they do that if the money is in the estate's name and it's set to close in the next month or so? Can they request that the plan splits the money into accts in my wife and her sister's names?


It is best to check with the plan to determine whether the assets can be move into inherited 401(k) accounts for your wife and her sister. The IRS has issued private letter rulings (PLR) allowing such transactions, but a PLR cannot be relied on by anyone except the party to whom it was issued. The most your wife and her sister can do is ask the plan administrator. If the plan administrator, they have the option of getting their own PLRs. One thing to bear in mind is that the plan administrator is not concerned ( or even be familiar with) estate issues. Their focus is on ensuring that the plan operates in compliance with the provisions of the plan document and the tax code. Sometimes, the two can seem to require different things.

By the way, it is not five years (for the distribution period). That applies only if he had died before his RBD and the estate was his beneficiary. The actual distribution period depends on his age at death, and possibly her age at death.

#3 Rob O.

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Posted 20 October 2008 - 04:04 PM

Neither of them had reached their RBD nor did either of them take any withdrawals from. I've unfortunately come to realize what you mentioned about the plan provisions differing from the estate issues. This went from thinking it could be moved to an inheritance IRA to "well at least we have 5 years to spread it out" to having to take in a lump sum unless we can get them to move it into the daughter's names and take it out of the estate.

My mother in law passed away last December but hadn't designates a beneficiary in the 401k she inherited from her husband. She did have a will that split everything evenly between my wife and her sister. They were both named as co-executors. Upon receiving the proper paperwork, the plan admin moved her 401k into an account in the name of the estate. The estate could close as early as November 19th according the to attorney with entire estate being less than 200k.

I realize that they have up to 5 years to withdraw the money but how can they do that if the money is in the estate's name and it's set to close in the next month or so? Can they request that the plan splits the money into accts in my wife and her sister's names?


It is best to check with the plan to determine whether the assets can be move into inherited 401(k) accounts for your wife and her sister. The IRS has issued private letter rulings (PLR) allowing such transactions, but a PLR cannot be relied on by anyone except the party to whom it was issued. The most your wife and her sister can do is ask the plan administrator. If the plan administrator, they have the option of getting their own PLRs. One thing to bear in mind is that the plan administrator is not concerned ( or even be familiar with) estate issues. Their focus is on ensuring that the plan operates in compliance with the provisions of the plan document and the tax code. Sometimes, the two can seem to require different things.

By the way, it is not five years (for the distribution period). That applies only if he had died before his RBD and the estate was his beneficiary. The actual distribution period depends on his age at death, and possibly her age at death.