Death of Plan Sponsor

[Guest mwozniacki]

A sole proprietor dentist was the sponsor of a 401(k) plan. He died in November 2003. From January 1, 2004 through September 30, 2004, the estate has taken over the practice. On October 1, 2004, the spouse, who is also a dentist, will take over her deceased husband's practice. For 2004, how is the Profit Sharing contribution designated? Does the estate pay 3/4 of it and the spouse as the employer pay 1/4 of it? If so, does the estate then account for 3/4 of it on the tax return and the spouse account for 1/4 of it on her tax return? Or does the spouse pay all of it since she will be the plan sponsor as of the end of the 2004 plan year?

[mbozek]

You need to consult a tax advisor to answer the following questions. 1. Was the plan terminated when the dentist died because there was no longer a plan sponsor. 2. Can the spouse acquire her husbands plan as an asset of his estate. I dont know why the estate should be the employer since the spouse is the party who will claim the tax deductions for contibutions based on her net earnings. Why can't the spouse establish her own plan for her net earnings in 2004 and rollover any benefits she receives from her husband's plan to her plan and then terminate his plan?