Beneficiary

[Guest Earl Anthony]

Does a beneficiary pay taxes on a 401K Plan, when it is a mother of a son who passed away?

[david rigby]

In general, all distributions from qualified plans (ie, pension plans, profit-sharing plans [which includes 401k plans], etc.) are taxable to the recipient.

The first exception is for amounts previously contributed to the plan by the participant with after-tax money. 401k contributions are made on a pre-tax basis (hence tax deferred until paid out), but some profit-sharing plans permit the EE to also make after-tax contributions.

The second exception is when the distribution is eligible for a rollover, and is actually rolled over to an IRA. In this case, the tax is deferred until the amount is distributed from the IRA.

In the case of a distribution due to the death of the employee/participant, the amount is taxable to the beneficiary. If the beneficiary is the surviving spouse, then a lump sum distribution is generally eligible for rollover to an IRA. Non-spouse beneficiaries do not have rollover rights.

If I have errors of omission or commission, someone more qualified than I will correct me.