Payout do to death

[FJR]

Just want to verify this. Participant in 401(k) is deceased. Never married and has his elderly mother as beneficiary. Plan uses lump sum option. Elderly Mother appoints daughter as power of attorney(probably not relevent).

check gets issued Payable to elderly mother(not rolled over) and uses social security number of elderly mother? 20% witholding using SS# of mother? Something is making me question this.

Thanks

[david rigby]

Probably,

but it might depend on the specifics of the POA, and whether the POA is due to incapacity. The participant probably needs competent legal advice. The plan might also.

[jane123]

Pax

Wouldn’t the distribution be made to ( and therefore reportable for, i.e. in the name and tax ID number of) the designated beneficiary regardless of incapacity? If not, why?

[QDROphile]

Better check that 20% withholding.

[pmacduff]

I'm with QDROphile - I thought the mandatory 20% only applied to eligible rollover distributions...Mom can't roll this over. Also - I believe the check should be made payable to the Mom. Daughter can simply cash or deposit it because she has POA. Where's the issue?

[mbozek]

Non spouse beneficaries are subject to voluntary 10% withholding under IRC 3405. The 20% withholding applies only if the distribution can be rolled over. Unfortunately I dont think there can be a refund of withholding. The bene has to apply for a refund on the tax return. The amount withheld can reduce any amounts due for estimated taxes or wage withholding.

[Guest Harry O]

You can effectively refund the withholding through adjustments to the next quarterly withholding return. Give the excess back and reduce the aggregate withholding tax payable with respect to other participants by the same amount. The IRS doesn't get any individualized breakout of withholding amounts per participant until the 1099Rs are filed in the following January.