Partnership as Beneficiary

[bzorc]

Has anybody encountered a situation where, in a qualified plan, the participant desires to name a partnership as his/her primary and/or contingent designated beneficiary? The rationale behind this is to keep the children, who would be the beneficiaries of the partnership (a different family member would be the owner of the partnership), from "taking the money from the plan and running".

Assume the death of the participant and a distribution now has to be made. What are the tax consequences of a distribution being made? Can the money be distributed based on the life expectancy of the children, or does it have to be distributed immediately to the partnership?

Seems to be complicated, but any thoughts would be appreciated. Thanks.

[Guest Walt Dallas]

Since a partnership would not fit as a trust described in the Regs, I do not see how the look through rules that apply to trusts would help. The look through rules treat benefiiciaries of a trust as the Designated Beneficiary allowing the longer deferral periods. The funds should be under the 5 year rule as if payable to an estate. However, I have not run into this before.

[bzorc]

Also, in looking at the regulations (1.401(a)(9)-4, Q-3), only individuals may be designated beneficiaries, except for the trust exception outlined in Q-5. So a partnership (or an estate), per the reading of the regs, can't be a designated beneficiary.

Thanks for the reply.