Plan termination due to death of owner

[Guest lindamichals]

401k safe harbor plan has not been funded for 2010 due to death of owner. Who knows what to do in this case? Does the spouse take over as trustee and then become responsible for the funding? Since it is very likely the plan will not be funded by the 9/15/11 deadline, does the plan automatically become a regular 401k and subject to testing? So many issues to deal with, don't know where to begin. Thank you.

[mbozek]

401k safe harbor plan has not been funded for 2010 due to death of owner. Who knows what to do in this case? Does the spouse take over as trustee and then become responsible for the funding? Since it is very likely the plan will not be funded by the 9/15/11 deadline, does the plan automatically become a regular 401k and subject to testing? So many issues to deal with, don't know where to begin. Thank you.

General rule: the business is part of the deceased owner's estate and its operation/disposition is the responsibility of the executor. Plan is operated by the business. Plan should have provision for sucessor sponsor of the plan/adoption by sucessor to take control of plan including termination. In many cases the executor of the estate will terminate the plan/ sell or wind down the business.

You need to work closely with the tax advisor to the estate b/c expenses of the business after death of owner become expense of the estate which is a separate taxpayer. Have you contacted the executor or counsel for the estate?