Withholding Requirement on Lump Sum Distribution to Estate

[luissaha]

We have a participant who died with no beneficiary designation on file. Under the terms of the plan, his estate is the default beneficiary. We are ready to make the distribution to the estate, but I had a question on withholding. The distribution is in the form of a single, lump sum payment.This is not an eligible rollover distribution because the estate is the beneficiary, so are we required to send a 10% withholding notice and allow the executor to opt out of withholding? Not sure what to do here because we do not often make payments to estates.

[david rigby]

My understanding is:

- the estate cannot elect a direct rollover; therefore the 20% default withholding does not apply;

- the "other default" withholding will apply:10%; however, the estate has the right to elect zero withholding (just like any other payee, using a W-4P).

- use the estate's TIN, probably different from the decedent's SSN and also different from the executor's SSN.

[luissaha]

Thank you. That confirms my initial thoughts.