lump sum and death

[Tom Poje]

particiapnt signs election form for lump sum (<$2200)

particpant then dies over labor day before a check is actually cut.

now what? make check out to wife?

[mbozek]

2 options:

Make check payable to estate. If spouse is sole beneficiary of estate then she can roll it over to her own IRA.

Check plan procedures to see if there is a default option where participant dies without a designated beneficiary. Most plans have a provision that pays benefits of a deceased married participant to the spouse where there is no designated bene.

[could be me maybe not]

Wouldn't you see if there is a beneficiary before you wrote out a check to the estate??!! Maybe I'm the beneficiary. Then again, maybe I'm the beneficiary of the estate even know he has a wife. I am quite handsome you know.

[JDuns]

I think that Tom's question is centered on whether the participant's death impacts the pending distribution. I think that the answer is that it depends entirely on the wording in the plan and its administrative procedures.

If the distribution is in process (for example, the participant dies after the plan has instructed the trustee to cut the check but before it has been sent), many plans would continue the distribution in the name of the participant (which would then become an asset of the participant's estate).

If the distribution process has not yet begun, many plans disregard the elected form of distribution and provide the death benefit. In that case, the benefit would be payable to the designated beneficiary (if any) or according to the plan's terms where no beneficiary had been designated.

[could be me maybe not]

I for one do not understand how any plan document would allow payment of a retirement benefit to someone who the plan knows to be deceased.

Seems to me you need to stop or correct the transaction. Period.

[mbozek]

Under state law a check payable to a decedent becomes property of his estate and can be cashed by the representative of the estate, e.g., the executor for distribution under his will. Under IRS rulings, if the spouse is the sole bene of the estate, the pension distribution check can be rolled over to her IRA.

[could be me maybe not]

Thanks for the explanation.